Processing of the -amyloid precursor protein (APP) by -and ␥-secretases generates the amyloidogenic peptide A, a major factor in the etiology of Alzheimer's disease. Following the recent identification of the -secretase -amyloid-converting enzyme (BACE), we herein investigate its zymogen processing, molecular properties, and cellular trafficking. Our data show that among the proprotein convertase family members, furin is the major converting enzyme of pro-BACE into BACE within the trans-Golgi network of HK293 cells. While we demonstrate that the 24-amino acid prosegment is required for the efficient exit of pro-BACE from the endoplasmic reticulum, it may not play a strong inhibitory role since we observe that pro-BACE can produce significant quantities of the Swedish mutant APP sw -secretase product C99. BACE is palmitoylated at three Cys residues within its transmembrane/cytosolic tail and is sulfated at mature N-glycosylated moieties. Data with three different antibodies show that a small fraction of membrane-bound BACE is shed into the medium and that the extent of ectodomain shedding is palmitoylationdependent. Overexpression of full-length BACE causes a significant increase in the production of C99 and a decrease in the ␣-secretase product APPs␣. Although there is little increase in the generation of A by full-length BACE, overexpression of either a soluble form of BACE (equivalent to the shed form) or one lacking the prosegment leads to enhanced A levels. These findings suggest that the shedding of BACE may play a role in the amyloidogenic processing of APP.Alzheimer's disease is a progressive degenerative disorder of the brain characterized by mental deterioration, memory loss, confusion, and disorientation. Among the cellular mechanisms contributing to this pathology are two types of fibrous protein deposition in the brain, intracellular neurofibrillary tangles consisting of polymerized tau protein, and abundant extracellular fibrils largely composed of -amyloid 1 (for reviews see Refs. 1-3). -Amyloid, also known as A, arises from proteolytic processing of the -amyloid precursor protein (APP) at the -and ␥-secretase cleavage sites. The cellular toxicity and amyloid-forming capacity of the two major forms of A (A 40 and especially A 42 ) have been well documented (1-3).An alternative, anti-amyloidogenic cleavage carried out by ␣-secretase(s) is located within the A peptide sequence of APP, thus precluding the formation of intact insoluble A. This cleavage by ␣-secretase within the (His-His-GlnLys2Leu-Val) sequence of APP is the major physiological route of APP maturation. The products of this reaction are a soluble 100 -120-kDa N-terminal fragment (APPs␣) and a C-terminal membrane-bound ϳ9-kDa segment (C83). In several recent reports, metalloproteinases such as ADAM9, -10, and -17 were shown to be involved in the ␣-secretase cleavage