Alzheimer's disease (AD) is a neurodegenerative disorder resulting in the deposition of amyloid beta-peptide (A beta) in senile plaques in cerebral and limbic corteces and the walls of meningeal and cerebral blood vessels. A beta is a proteolytic break-down product of a membrane bound precursor, the beta-amyloid precursor protein (beta APP). Conventional secretory processing of beta APP prevents A beta formation. An additional processing pathway of beta APP involving endosomal/lysosomal targeting is described. Within isolated lysosomes amygloidogenic fragments are found which might serve as precursors for A beta production. From such precursors A beta might be proteolytically processed. Indeed, secreted A beta was identified in the media of cultured cells. A beta is also secreted in vivo and can be detected in human plasma and cerebral spinal fluid. These findings provide a cellular system to analyze the molecular mechanism and the biological regulation of A beta generation. Furthermore, the effect of inherited mutations within the beta APP gene in some cases of familial AD can now be analyzed in such tissue culture cells transfected with the mutant cDNA constructs. A model will be presented proposing that A beta generation might occur during reinternalization of the full-length molecule.