Synaptic dysfunction has been shown to be one of the earliest correlates of disease progression in animal models of Alzheimer's disease. Amyloid-beta protein (Abeta) is thought to play an important role in disease-related synaptic dysfunction, but the mechanism by which Abeta leads to synaptic dysfunction is not understood. Here we describe evidence that cleavage of APP in the C terminus may be necessary for the deficits present in APP transgenic mice. In APP transgenic mice with a mutated cleavage site at amino acid 664, normal synaptic transmission, synaptic plasticity, and learning were maintained despite the presence of elevated levels of APP, Abeta42, and even plaque accumulation. These results indicate that cleavage of APP may play a critical role in the development of synaptic and behavioral dysfunction in APP transgenic mice.