Mutations within the beta-amyloid precursor protein gene cosegregate with the early-onset form of familial Alzheimer's Disease (FAD). It is not known how these mutations result in disease; however, one early-onset AD mutation in a Swedish kindred increases potentially amyloidogenic fragments and beta-protein production in cells expressing the mutant beta-APP. Using a novel recombinant reporter system we found a qualitative change in the secreted product, from cleavage within the beta-protein sequence to cleavage near the N-terminal region of the beta-protein, even though the total amount of secreted mutant product is similar to wild-type. The results suggest that the increased formation of potentially amyloidogenic fragments in cells expressing the Swedish FAD occurs by enzymatic cleavage in the secretory pathway. Alterations in the secretory process may predispose an individual to AD.