Formation of senile plaques containing the β-amyloid peptide (Aβ) derived from the amyloid precursor protein (APP) is an invariant feature of Alzheimer's disease (AD). APP is cleaved either by β-secretase or by α-secretase to initiate amyloidogenic (release of Aβ) or nonamyloidogenic processing of APP, respectively. A key to understanding AD is to unravel how access of these enzymes to APP is regulated. Here, we demonstrate that lipid rafts are critically involved in regulating Aβ generation. Reducing cholesterol levels in N2a cells decreased Aβ production. APP and the β-site APP cleavage enzyme (BACE1) could be induced to copatch at the plasma membrane upon cross-linking with antibodies and to segregate away from nonraft markers. Antibody cross-linking dramatically increased production of Aβ in a cholesterol-dependent manner. Aβ generation was dependent on endocytosis and was reduced after expression of the dynamin mutant K44A and the Rab5 GTPase-activating protein, RN-tre. This inhibition could be overcome by antibody cross-linking. These observations suggest the existence of two APP pools. Although APP inside raft clusters seems to be cleaved by β-secretase, APP outside rafts undergoes cleavage by α-secretase. Thus, access of α- and β-secretase to APP, and therefore Aβ generation, may be determined by dynamic interactions of APP with lipid rafts.