Recent studies of cellular amyloid precursor protein (APP) metabolism demonstrate a beta-/gamma-secretase pathway resident to the endoplasmic reticulum (ER)/Golgi resulting in intracellular generation of soluble APP (APPsbeta) and Abeta42 peptide. Thus, these intracellular compartments may be key sites of amyloidogenic APP metabolism and Alzheimer's disease pathogenesis. We hypothesized that the ER chaperone immunoglobulin binding protein (BiP/GRP78) binds to and facilitates correct folding of nascent APP. Metabolic labeling and immunoprecipitation of transiently transfected human embryonic kidney 293 cells demonstrated co-precipitation of APP with GRP78, revealing their transient interaction in the ER. Maturation of cellular APP was impaired by this interaction. Furthermore, the levels of APPs, Abeta40, and Abeta42 recovered in conditioned medium were lower compared with cells transfected with APP alone. Co-expression with APP of GRP78 T37G, an ATPase mutant, almost completely blocked cellular APP maturation as well as recovery of APPs, Abeta40, and Abeta42 in conditioned medium. The inhibitory effects of GRP78 and GRP78 T37G on Abeta40 and Abeta42 secretion were magnified by co-expression with the Swedish mutation of APP (K670N/M671L). Collectively, these data suggest a transient and direct interaction of GRP78 with APP in the ER that modulates intracellular APP maturation and processing and may facilitate its correct folding.