γ-Secretase processing of the amyloid precursor protein (APP) generates Aβ 40 and Aβ 42, peptides that constitute the principal components of the β-amyloid plaque pathology of Alzheimer's disease (AD). The γ-secretase activity is executed by a high-molecular-weight complex of which presenilin 1 (PS1) is an essential component. PS1 is a multi-pass membrane protein, and the large hydrophilic loop domain between transmembrane domains 6 and 7 has been shown to interact with various proteins. To determine the physiological function of the loop domain, we created a strain of PS1 knock-in mice in which the exon 10, which encodes most of the hydrophilic loop sequence, was deleted from the endogenous PS1 gene. We report here that the homozygous exon 10-deleted mice are viable but exhibit drastically reduced γ-secretase cleavage at the Aβ 40, but not the Aβ 42, site. Surprisingly, this reduction of Aβ 40 is associated with exacerbated plaque pathology when expressed on APP transgenic background. Thus, the PS1 loop plays a regulatory role in γ-secretase processing, and decreased Aβ 40, not increased Aβ 42 is likely the cause for the accelerated plaque deposition in these animals. Our finding supports a protective role of Aβ 40 against amyloid pathology and raises the possibility that impaired γ-secretase activity could be the basis for AD pathogenesis in general.