Converging lines of evidence implicate the beta-amyloid peptide (Aβ) as causative in Alzheimer's disease. We describe a novel class of compounds that reduce Aβ production by functionally inhibiting γ-secretase, the activity responsible for the carboxy-terminal cleavage required for Aβ production. These molecules are active in both 293 HEK cells and neuronal cultures, and exert their effect upon Aβ production without affecting protein secretion, most notably in the secreted forms of the amyloid precursor protein (APP). Oral administration of one of these compounds, N-[N-(3,5-difluorophenacetyl)-l-alanyl]-S-phenylglycine t-butyl ester, to mice transgenic for human APPV717F reduces brain levels of Aβ in a dose-dependent manner within 3 h. These studies represent the first demonstration of a reduction of brain Aβin vivo. Development of such novel functional γ-secretase inhibitors will enable a clinical examination of the Aβ hypothesis that Aβ peptide drives the neuropathology observed in Alzheimer's disease.