Processing of the amyloid precursor protein (APP) by -and ␥-secretases generates pathogenic -amyloid (A) peptides associated with Alzheimer disease (AD), whereas cleavage of APP by ␣-secretases precludes A formation. Little is known about the role of ␣-secretase cleavage in ␥-secretase regulation. Here, we show that ␣-secretase-cleaved APP C-terminal product (␣CTF) functions as an inhibitor of ␥-secretase. We demonstrate that the substrate inhibitory domain (ASID) within ␣CTF, which is bisected by the ␣-secretase cleavage site, contributes to this negative regulation because deleting or masking this domain turns ␣CTF into a better substrate for ␥-secretase. Moreover, ␣-secretase cleavage can potentiate the inhibitory effect of ASID. Inhibition of ␥-secretase activity by ␣CTF is observed in both in vitro and cellular systems. This work reveals an unforeseen role for ␣-secretase in generating an endogenous ␥-secretase inhibitor that down-regulates the production of A. Deregulation of this feedback mechanism may contribute to the pathogenesis of AD.The amyloid precursor protein (APP) 2 is sequentially cleaved by -and ␥-secretases to generate A peptides, which are widely considered to play a causative role in the pathogenesis of Alzheimer disease (AD) (1). This pathway also generates soluble APP (sAPP) and APP intracellular domain. Alternatively, APP can be processed by ␣-secretase that cuts within A peptides, which precludes the formation of toxic peptides. Similarly, the ␣/␥ pathway leads to formation of soluble APP␣ (sAPP␣), the P3 peptide, and the APP intracellular domain. It appears that ␥-secretase cleavage of substrates first requires another protease that removes the majority of the extracellular domain of the substrate. The sequential cleavage of APP is characteristic of regulated intramembrane proteolysis (RIP) (2). RIP generally requires two proteolytic steps, whereby the second intramembrane cleavage is dependent on the first cleavage, such as in Notch and sterol regulatory element binding proteins signaling. RIP has been found to govern sterol regulation, cell fate determination, unfolded protein responses, growth factor activation, mitochondria membrane remodeling, and apoptosis (2-5).A distinctive feature of APP processing compared with other RIPs is the existence of two proteases (-and ␣-secretase) that are both capable of executing the first cleavage. Recent studies have shown that -secretase cleavage removes the large extracellular domain of APP, freeing the N terminus of CTF, which is recognized by nicastrin (6). Recruiting CTF to the docking site makes the substrate accessible to the active site of ␥-secretase for hydrolysis. However, the role of nicastrin for substrate binding has been controversial (7-9). Nevertheless, -secretase cleavage converts a latent substrate of ␥-secretase into an active one. Whether ␣-secretase plays a role similar to that of -secretase in the regulation of APP processing by ␥-secretase is unknown. It has been suggested that ␣-secretase competes with -...