Sequential cleavage of amyloid precursor protein by β- and γ-secretases generates β-amyloid peptides (Aβ), which accumulate in the brains of patients with Alzheimer's disease. We recently identified S-palmitoylation of two γ-secretase subunits, APH1 and nicastrin. S-Palmitoylation is an essential posttranslational modification for the proper trafficking and function of many neuronal proteins. In cultured cell lines, lack of S-palmitoylation causes instability of nascent APH1 and nicastrin but does not affect γ-secretase processing of amyloid precursor protein. To determine the importance of γ-secretase S-palmitoylation for Aβ deposition in the brain, we generated transgenic mice coexpressing human wild-type or S-palmitoylation-deficient APH1aL and nicastrin in neurons in the forebrain. We found that lack of S-palmitoylation did not impair the ability of APH1aL and nicastrin to form enzymatically active protein complexes with endogenous presenilin 1 and PEN2 or affect the localization of γ-secretase subunits in dendrites and axons of cortical neurons. When we crossed these mice with 85Dbo transgenic mice, which coexpress familial Alzheimer's disease-causing amyloid precursor protein and presenilin 1 variants, we found that coexpression of wild-type or mutant APH1aL and nicastrin led to marked stabilization of transgenic presenilin 1 in the brains of double-transgenic mice. Interestingly, we observed a moderate, but significant, reduction in amyloid deposits in the forebrain of mice expressing S-palmitoylation-deficient γ-secretase subunits compared with mice overexpressing wild-type subunits, as well as a reduction in the levels of insoluble Aβ(40-42). These results indicate that γ-secretase S-palmitoylation modulates Aβ deposition in the brain.