Autosomal dominant forms of familial Alzheimer’s disease (FAD) are associated with increased production of the amyloid β peptide, Aβ42, which is derived from the amyloid protein precursor (APP). In FAD, as well as in sporadic forms of the illness, Aβ peptides accumulate abnormally in the brain in the form of amyloid plaques. Here, we show that overexpression of FAD(717V→F)-mutant human APP in neurons of transgenic mice decreases the density of presynaptic terminals and neurons well before these mice develop amyloid plaques. Electrophysiological recordings from the hippocampus revealed prominent deficits in synaptic transmission, which also preceded amyloid deposition by several months. Although in young mice, functional and structural neuronal deficits were of similar magnitude, functional deficits became predominant with advancing age. Increased Aβ production in the context of decreased overall APP expression, achieved by addition of the Swedish FAD mutation to the APP transgene in a second line of mice, further increased synaptic transmission deficits in young APP mice without plaques. These results suggest a neurotoxic effect of Aβ that is independent of plaque formation.