Evidence suggests that the beta-amyloid peptide (Abeta) is central to the pathophysiology of Alzheimer's disease (AD). Amyloid plaques, primarily composed of Abeta, progressively develop in the brains of AD patients, and mutations in three genes (APP, PS1, and PS2) cause early onset familial AD (FAD) by directly increasing synthesis of the toxic, plaque-promoting Abeta42 peptide. Given the strong association between Abeta and AD, therapeutic strategies to lower the concentration of Abeta in the brain should prove beneficial for the treatment of AD. One such strategy would involve inhibiting the enzymes that generate Abeta. Abeta is a product of catabolism of the large Typel membrane protein, amyloid precursor protein (APP). Two proteases, called beta- and gamma-secretase, mediate the endoproteolysis of APP to liberate the Abeta peptide. For over a decade, the molecular identities of these proteases were unknown. Recently, the gamma-secretase has been tentatively identified as the presenilin proteins, PS1 and PS2, and the identity of the beta-secretase has been shown to be the novel transmembrane aspartic protease, beta-site APP cleaving enzyme 1 (BACE1; also called Asp2 and memapsin2). BACE2, a novel protease homologous to BACE1, was also identified, and together the two enzymes define a new family of transmembrane aspartic proteases. BACE1 exhibits all the properties of the beta-secretase, and as the key rate-limiting enzyme that initiates the formation of Abeta, BACE1 is an attractive drug target for AD. Here, I review the identification and initial characterization of BACE1 and BACE2, and summarize our current understanding of BACE1 post-translational processing and intracellular trafficking. In addition, I discuss recent studies of BACE1 knockout mice and the BACE1 X-ray structure, and relate implications for BACE1 drug development.