Several missense mutations causing early-onset Alzheimer's disease (AD) have been described in the gene coding for the beta-amyloid precursor protein (beta APP). A double mutation found in a Swedish family is located before the amyloid beta-peptide (A beta) region of beta APP and results in the increased production and secretion of A beta. Here we show that the increased production of A beta results from a cellular mechanism, which differs substantially from that responsible for the production of A beta from wild-type beta APP. In the latter case, A beta generation requires reinternalization and recycling of beta APP. In the case of the Swedish mutation the N-terminal beta-secretase cleavage of A beta occurs in Golgi-derived vesicles, most likely within secretory vesicles. Therefore, this cleavage occurs in the same compartment as the alpha-secretase cleavage, which normally prevents A beta production, explaining the increased A beta generation by a competition between alpha- and beta-secretase.