Alzheimer's disease (AD) is the most frequent cause of dementia, although no genetic abnormality has been identified. Recent studies have elucidated the molecular defect in AD, including the abnormal deposition of amyloid beta peptide (beta/A4) in senile plaques of affected individuals. Normal brain contains the enzyme, APP secretase, which cleaves inside the beta/A4 portion of the precursor protein (APP); abnormal processing of APP occurs in AD brain. Until now, no evidence has been provided that APP secretase is an intracellular proteinase. We have now prepared two synthetic substrates of APP secretase, both of which contain the cleavage point and are much more sensitive than substrates previously available to identify APP secretase. Using these substrates, we found an intracellular proteinase that has APP secretase activity. This proteinase has been identified as cathepsin B.