Progressive cerebral deposition of the amyloid beta-peptide is an early and invariant feature of Alzheimer's disease. The beta-peptide is released by proteolytic cleavages from the beta-amyloid precursor protein (beta APP), a membrane-spanning glycoprotein expressed in most mammalian cells. Normal secretion of beta APP involves a cleavage in the beta-peptide region, releasing the soluble extramembranous portion and retaining a 10K C-terminal fragment in the membrane. Because this secretory pathway precludes beta-amyloid formation, we searched for an alternative proteolytic processing pathway that can generate beta-peptide-bearing fragments from full-length beta APP. Incubation of living human endothelial cells with a beta APP antibody revealed reinternalization of mature beta APP from the cell surface and its targeting to endosomes/lysosomes. After cell-surface biotinylation, full-length biotinylated beta APP was recovered inside the cells. Purification of lysosomes directly demonstrated the presence of mature beta APP and an extensive array of beta-peptide-containing proteolytic products. Our results define a second processing pathway for beta APP and suggest that it may be responsible for generating amyloid-bearing fragments in Alzheimer's disease.