␥-Secretase is an intramembrane-cleaving protease that is responsible for the generation of amyloid- peptides linked to the pathogenesis of Alzheimer's disease. Using a substituted cysteine accessibility method, we have previously shown that the hydrophilic "catalytic pore" structure of ␥-secretase is formed by the transmembrane domains (TMDs) 6, 7, and 9 of presenilin 1 (PS1), the catalytic subunit of ␥-secretase, within the membrane. Here, we analyzed the structure in and around the first hydrophobic region, the putative TMD1, of PS1, of which the precise function as well as three-dimensional location within ␥-secretase remained unknown. We found that TMD1 is located in proximity to the catalytic GxGD and PAL motifs within the C-terminal fragment of PS1, facing directly the catalytic pore. Competition experiments using known ␥-secretase inhibitors suggested that the N-terminal region of TMD1 functions as a subsite during proteolytic action of the ␥-secretase. Intriguingly, binding of inhibitors affected water accessibility of residues at the membrane border of TMD1, suggesting the possibility of a dynamic motion of TMD1 during the catalytic process. Our results provide mechanistic insights into the functional role of TMD1 of PS1 in the intramembrane-cleaving activity of the ␥-secretase.