The in vitro generation of uniform populations of neurons from mouse embryonic stem cells (ESCs) provides a novel opportunity to study gene function in neurons. This is of particular interest when mutations lead to lethal in vivo phenotypes. Although the amyloid precursor protein (APP) and its proteolysis are regarded as key elements of the pathology of Alzheimer's disease, the physiological function of APP is not well understood and mice lacking App and the related gene Aplp2 die early postnatally without any obvious histopathological abnormalities. Here we show that glutamatergic neurons differentiated from ESCs lacking both genes reveal a decreased expression of the vesicular glutamate transporter 2 (VGLUT2) both at the mRNA and protein level, as well as a reduced uptake and/or release of glutamate. Blocking gamma-secretase cleavage of APP in wild-type neurons resulted in a similar decrease of VGLUT2 expression, whereas VGLUT2 levels could be restored in App-/-Aplp2-/- neurons by a construct encompassing the C-terminal intracellular domain of APP. Electrophysiological recordings of hippocampal organotypic slice cultures prepared from corresponding mutant mice corroborated these observations. Gene expression profiling and pathway analysis of the differentiated App-/-Aplp2-/- neurons identified dysregulation of additional genes involved in synaptic transmission pathways. Our results indicate a significant functional role of APP and amyloid precursor-like protein 2 (APLP2) in the development of synaptic function by the regulation of glutamatergic neurotransmission. Differentiation of ESCs into homogeneous populations thus represents a new opportunity to explore gene function and to dissect signaling pathways in neurons. Disclosure of potential conflicts of interest is found at the end of this article.