Abnormal activation of calpain is implicated in synaptic dysfunction and participates in neuronal death in Alzheimer disease (AD) and other neurological disorders. Pharmacological inhibition of calpain has been shown to improve memory and synaptic transmission in the mouse model of AD. However, the role and mechanism of calpain in AD progression remain elusive. Here we demonstrate a role of calpain in the neuropathology in amyloid precursor protein (APP) and presenilin 1 (PS1) double-transgenic mice, an established mouse model of AD. We found that overexpression of endogenous calpain inhibitor calpastatin (CAST) under the control of the calcium/calmodulin-dependent protein kinase II promoter in APP/PS1 mice caused a remarkable decrease of amyloid plaque burdens and prevented Tau phosphorylation and the loss of synapses. Furthermore, CAST overexpression prevented the decrease in the phosphorylation of the memory-related molecules CREB and ERK in the brain of APP/PS1 mice and improved spatial learning and memory. Interestingly, treatment of cultured primary neurons with amyloid-beta (Abeta) peptides caused an increase in the level of beta-site APP-cleaving enzyme 1 (BACE1), the key enzyme responsible for APP processing and Abeta production. This effect was inhibited by CAST overexpression. Consistently, overexpression of calpain in heterologous APP expressing cells up-regulated the level of BACE1 and increased Abeta production. Finally, CAST transgene prevented the increase of BACE1 in APP/PS1 mice. Thus, calpain activation plays an important role in APP processing and plaque formation, probably by regulating the expression of BACE1.