Abstract: The carboxy-terminal ends of the 40- and 42-amino acids amyloid β-protein (Aβ) may be generated by the action of at least two different proteases termed γ(40)- and γ(42)-secretase, respectively. To examine the cleavage specificity of the two proteases, we treated amyloid precursor protein (APP)-transfected cell cultures with several dipeptidyl aldehydes including N-benzyloxycarbonyl-Leu-leucinal (Z-LL-CHO) and the newly synthesized N-benzyloxycarbonyl-Val-leucinal (Z-VL-CHO). All dipeptidyl aldehydes tested inhibited production of both Aβ1-40 and Aβ1-42. Changes in the P1 and P2 residues of these aldehydes, however, indicated that the amino acids occupying these positions are important for the efficient inhibition of γ-secretases. Peptidyl aldehydes inhibit both cysteine and serine proteases, suggesting that the two γ-secretases belong to one of these mechanistic classes. To differentiate between the two classes of proteases, we treated our cultures with the specific cysteine protease inhibitor E-64d. This agent inhibited production of secreted Aβ1-40, with a concomitant accumulation of its cellular precursor indicating that γ(40)-secretase is a cysteine protease. In contrast, this treatment increased production of secreted Aβ1-42. No inhibition of Aβ production was observed with the potent calpain inhibitor I (acetyl-Leu-Leu-norleucinal), suggesting that calpain is not involved. Together, these results indicate that γ(40)-secretase is a cysteine protease distinct from calpain, whereas γ(42)-secretase may be a serine protease. In addition, the two secretases may compete for the same substrate. Dipeptidyl aldehyde treatment of cultures transfected with APP carrying the Swedish mutation resulted in the accumulation of the β-secretase C-terminal APP fragment and a decrease of the α-secretase C-terminal APP fragment, indicating that this mutation shifts APP cleavage from the α-secretase site to the β-secretase site.