␥-Secretase is a protease complex composed of presenilin (PS), nicastrin (NCT), APH-1, and PEN-2, which catalyzes intramembrane cleavage of several type I transmembrane proteins including the Alzheimer's disease-associated -amyloid precursor protein. We generated stable RNA interference-mediated PEN-2 knockdown cells to probe mutant PEN-2 variants for functional activity. Knockdown of PEN-2 was associated with impaired NCT maturation and deficient PS1 endoproteolysis, which was efficiently rescued by wild type or N-terminally tagged PEN-2 but not by C-terminally tagged PEN-2 or by the C-terminally truncated PEN-2-⌬C mutant. Although the latter mutants rescued the PS1 holoprotein accumulation associated with the PEN-2 knockdown, they failed to restore normal levels of the PS1 N-and C-terminal fragments and to maturate NCT. PEN-2-⌬C was highly unstable and rapidly turned over by proteasomal degradation consistent with its failure to become stably incorporated into the ␥-secretase complex. In addition, expression of PEN-2-⌬C caused a selective instability of the PS1 N-/C-terminal fragment heterodimer that underwent proteasomal degradation, whereas NCT and APH-1 were stable. Interestingly, when we knocked down PEN-2 in the background of the endoproteolysis-deficient PS1 ⌬exon9 mutant, immature NCT still accumulated, demonstrating that PEN-2 is also required for ␥-secretase complex maturation when PS endoproteolysis cannot occur. Taken together, our data suggest that PEN-2 is required for the stabilization of the PS fragment heterodimer within the ␥-secretase complex following PS endoproteolysis. This function critically depends on the PEN-2 C terminus. Moreover, our data show that PEN-2 is generally required for ␥-secretase complex maturation independent of its activity in PS1 endoproteolysis.The Alzheimer's disease (AD) 1 -associated ␥-secretase is a high molecular weight complex with an aspartyl protease activity that catalyzes the second of two subsequent proteolytic cleavages of the -amyloid precursor protein (APP) implicated in AD (1). This unusual, intramembranous cleavage liberates the neurotoxic amyloid- peptide from the membrane. Amyloid- peptide aggregates and is deposited in the brain of AD patients in amyloid plaques, an invariant pathological hallmark of AD (2). The ␥-secretase complex is composed of either of the two presenilins (PS), PS1 and PS2, polytopic membrane proteins that are endoproteolytically cleaved into stable heterodimers consisting of an N-and C-terminal fragment (NTF and CTF) (3), the type I transmembrane glycoprotein nicastrin (NCT) (4, 5), and the polytopic membrane proteins PEN-2 (6), APH-1a, and/or APH-1b (6, 7). Expression of the ␥-secretase complex components is coordinately regulated. RNA interference (RNAi)-mediated knockdown studies in cultured Drosophila and mammalian cells as well as studies with cells derived from PS1, PS1/2, or NCT knockout mice have shown that ␥-secretase complex formation is coordinately regulated. Downregulation or genetic ablation of a given compone...