A central question in Alzheimer's disease (AD) research is what role β-amyloid peptide (Aβ) plays in synaptic dysfunction. Synaptic activity increases Aβ secretion, potentially inhibiting synapses, but also decreases intraneuronal Aβ, protecting synapses. We now show that levels of secreted Aβ fall with time in culture in neurons of AD-transgenic mice, but not wild-type mice. Moreover, the ability of synaptic activity to elevate secreted Aβ and reduce intraneuronal Aβ becomes impaired in AD-transgenic but not wild-type neurons with time in culture. We demonstrate that synaptic activity promotes an increase in the Aβ-degrading protease neprilysin at the cell surface and a concomitant increase in colocalization with Aβ42. Remarkably, AD-transgenic but not wild-type neurons show reduced levels of neprilysin with time in culture. This impaired ability to secrete Aβ and reduce intraneuronal Aβ has important implications for the pathogenesis and treatment of AD.