Proteolytic processing of the amyloid precursor protein (APP) by beta- and gamma-secretases results in the production of a highly amyloidogenic Abeta peptide, which deposits in the brains of Alzheimer's disease patients. Similar gamma-secretase processing occurs in another transmembrane protein, Notch1, releasing a potent signaling molecule, the Notch C-terminal domain. It has been shown that both events are dependent on a presenilin-dependent protease. We now test the hypothesis that activated Notch1 and APP are competitive substrates for the same proteolytic activity in neurons. Treatment of neurons with the native Notch ligand, Delta, induces endogenous Notch1 intramembraneous cleavage and diminishes Abeta production in a dose-dependent manner. Complementary experiments showed that the converse was also true. Overexpressing human APP (APP(695Sw)) in neurons leads to a decrease in endogenous Notch1 signal transduction, as assessed by a CBF1 luciferase transcription assay, by Notch C-terminal domain nuclear translocation in vitro and by analysis of Notch C-terminal domain generation and Notch1 staining in vivo. In summary, two complementary approaches suggest that APP and Notch1 are physiologically relevant competitive substrates for gamma-secretase activity.