Members of the FE65 family of adaptor proteins, FE65, FE65L1, and FE65L2, bind the C-terminal region of the amyloid precursor protein (APP). Overexpression of FE65 and FE65L1 was previously reported to increase the levels of ␣-secretase-derived APP (APPs␣). Increased -amyloid (A) generation was also observed in cells showing the FE65-dependent increase in APPs␣. To understand the mechanism for the observed increase in both A and APPs␣ given that ␣-secretase cleavage of a single APP molecule precludes A generation, we examined the effects of FE65L1 overexpression on APP Cterminal fragments (APP CTFs). Our data show that FE65L1 potentiates ␥-secretase processing of APP CTFs, including the amyloidogenic CTF C99, accounting for the ability of FE65L1 to increase generation of APP Cterminal domain and A40. The FE65L1 modulation of these processing events requires binding of FE65L1 to APP and APP CTFs and is not because of a direct effect on ␥-secretase activity, because Notch intracellular domain generation is not altered by FE65L1. Furthermore, enhanced APP CTF processing can be detected in early endosome vesicles but not in endoplasmic reticulum or Golgi membranes, suggesting that the effects of FE65L1 occur at or near the plasma membrane. Finally, although FE65L1 increases APP C-terminal domain production, it does not mediate the APP-dependent transcriptional activation observed with FE65.Processing of the amyloid precursor protein (APP) 1 results in the generation of the amyloidogenic peptide, A, which plays a central role in the pathogenesis of Alzheimer's disease. Cleavage of C99, the APP C-terminal fragment derived from -secretase processing of APP, by ␥-secretase generates the A peptide. Furthermore, ␥-secretase cleavage of C99 and C83, the ␣-secretase derived APP C-terminal fragment (APP CTF), releases the APP C-terminal domain (AICD), a 6-kDa peptide also called CTF␥ or AID, that regulates transcription after translocation to the nucleus (1-4).The majority of proteins reported to bind the 47-amino acid intracellular region of APP (5-7), including the FE65 protein family members FE65, FE65L1, and FE65L2, bind the YENPTY sorting motif of APP via a phosphotyrosine interaction domain (PID/PTB). YENP is a clathrin-coated pit internalization domain required for trafficking of APP into the endocytic pathway (8, 9). Previous studies have shown that FE65 protein family members can alter the processing of APP by influencing APP trafficking. Increased maturation of APP and increased ␣-secretase-cleaved APP (APPs␣) secretion was observed in H4 neuroglioma cells induced for FE65L1 overexpression (10). Furthermore, enhanced secretion of APPs␣ and A was reported in Madin-Darby canine kidney APP695 cells stably overexpressing FE65 (11). Cell surface APP levels were elevated in these cells, and increased routing of APP into the endocytic pathway from the plasma membrane was suggested to account for the observed increase in A (11).The FE65 proteins are adaptor proteins that have three protein-protein interaction dom...