Mutations in the gene encoding the amyloid protein precursor (APP) cause autosomal dominant Alzheimer's disease^,,. Cleavage of APP by unidentified proteases, referred to as β- and γ-secretases^,,,, generates the amyloid β-peptide, the main component of the amyloid plaques found in Alzheimer's disease patients. The disease-causing mutations flank the protease cleavage sites in APP and facilitate its cleavage. Here we identify a new membrane-bound aspartyl protease (Asp2) with β-secretase activity. The Asp2 gene is expressed widely in brain and other tissues. Decreasing the expression of Asp2 in cells reduces amyloid β-peptide production and blocks the accumulation of the carboxy-terminal APP fragment that is created by β-secretase cleavage. Solubilized Asp2 protein cleaves a synthetic APP peptide substrate at the β-secretase site, and the rate of cleavage is increased tenfold by a mutation associated with early-onset Alzheimer's disease in Sweden. Thus, Asp2 is a new protein target for drugs that are designed to block the production of amyloid β-peptide peptide and the consequent formation of amyloid plaque in Alzheimer's disease.