The amyloid beta-protein (Abeta) deposited in Alzheimer's disease (AD), the most common form of dementia in the elderly, is a secreted proteolytic product of the amyloid beta-protein precursor (APP). Generation of Abeta from the APP requires two sequential proteolytic events, beta-secretase cleavage to generate the amino terminus, followed by gamma-secretase cleavage to generate the carboxyl terminus. Because this process is a central event in the pathogenesis of AD, gamma-secretase is believed to be an excellent therapeutic target. Gamma-secretase activity has been demonstrated to be membrane-associated, with the cleavage site primarily determined by the location of the substrate with respect to the membrane. It has also been shown that this unusual proteolytic activity not only occurs for APP, but also for proteins involved in morphogenic processes or cell proliferation and differentiation such as Notch and ErbB4. Thus far, all gamma-secretase substrates are involved in some form of nuclear signaling. These recent findings have important implications for the development of pharmacological interventions that target gamma-secretase.