Background Presenilin-dependent γ-secretase cleavage of several transmembrane proteins, including amyloid-β precursor protein and Notch, mediates the intramembrane proteolysis to liberate their intracellular domains that are involved in cellular signaling. Considering γ-secretase inhibitors as therapeutics for Alzheimer's disease, understanding the physiologically and biologically important substrate for γ-secretase activity in brains is emerging issue. To elucidate the molecular mechanism and physiological role of γ-secretase, we screened candidate molecules for γ-secretase substrates. Results We show that ephrin-B1, that participates in cell-cell repulsive and attractive signaling together with its Eph receptor, constitutively undergoes ectodomain shedding and that the residual membrane-tethered fragment is sequentially cleaved by γ-secretase to release the intracellular domain. Furthermore, overexpression of membrane-tethered ephrin-B1 caused protrusion of numerous cellular processes consisted of F-actin, that required the preservation of the most C-terminal region of ephrin-B1. In contrast, soluble intracellular domain translocated into the nucleus and had no effect on cell morphology. Conclusion Our findings suggest that ephrin-B is a genuine substrate for γ-secretase and regulates the cytoskeletal dynamics through intramembrane proteolysis.