γ-Secretase proteolyzes a variety of membrane-associated fragments derived from type I integral membrane proteins, including the amyloid β-protein precursor, involved in Alzheimers disease, and the Notch receptor, critical for cellular differentiation. This protease is composed of four integral membrane proteins: presenilin, nicastrin, Aph-1 and Pen-2. Assembly of these four components leads to presenilin autoproteolysis into two subunits, each of which contributes one aspartate to the active site of an aspartyl protease. The protease contains an initial docking site for substrate, where it binds prior to passing between the two presenilin subunits to the internal water-containing active site. The extracellular region of nicastrin also interacts with the N-terminus of the substrate as an essential step in substrate recognition and processing. Modulation of APP processing without interfering with Notch signaling is an important therapeutic goal, and allosteric sites on the protease allow such selective modulation. A better structural and mechanistic understanding of γ-secretase should ultimately allow structure-based design of more potent and selective modulators.