The endopeptidase neprilysin (NEP) is a major amyloid-beta (Abeta) degrading enzyme and has been implicated in the pathogenesis of Alzheimer's disease. Because NEP cleaves substrates other than Abeta, we investigated the potential role of NEP-mediated processing of neuropeptides in the mechanisms of neuroprotection in vivo. Overexpression of NEP at low levels in transgenic (tg) mice affected primarily the levels of neuropeptide Y (NPY) compared with other neuropeptides. Ex vivo and in vivo studies in tg mice and in mice that received lentiviral vector injections showed that NEP cleaved NPY into C-terminal fragments (CTFs), whereas silencing NEP reduced NPY processing. Immunoblot and mass spectrometry analysis showed that NPY 21-36 and 31-36 were the most abundant fragments generated by NEP activity in vivo. Infusion of these NPY CTFs into the brains of APP (amyloid precursor protein) tg mice ameliorated the neurodegenerative pathology in this model. Moreover, the amidated NPY CTFs protected human neuronal cultures from the neurotoxic effects of Abeta. This study supports the possibility that the NPY CTFs generated during NEP-mediated proteolysis might exert neuroprotective effects in vivo. This function of NEP represents a unique example of a proteolytic enzyme with dual action, namely, degradation of Abeta as well as processing of NPY.