Intramembranous "gamma-secretase" processing of beta-amyloid precursor protein (APP) and other transmembrane proteins, including Notch, is mediated by a macromolecular complex consisting of presenilins (PSs), nicastrin (NCT), APH-1, and PEN-2. We now demonstrate that in cells coexpressing PS1, APH-1, and NCT, full-length PS1 accumulates to high levels and is fairly stable. Upon expression of PEN-2, the levels of PS1 holoprotein are significantly reduced, commensurate with an elevation in levels of PS1 fragments. These findings suggest that APH-1 and NCT are necessary for stabilization of full-length PS1 and that PEN-2 is critical for the proteolysis of stabilized PS1. In N2a and 293 cell lines that stably overexpress PS1, APH-1, NCT, and PEN-2, PS1 fragment levels are elevated by up to 10-fold over endogenous levels. In these cells, we find a marked accumulation of the APP-CTF gamma (AICD) fragment and a concomitant reduction in levels of both APP-CTF beta and CTF alpha. Moreover, the production of the gamma-secretase-generated Notch S3/NICD derivative is modestly elevated. However, we failed to observe a corresponding increase in levels of secreted A beta peptides in the medium of these cells. These results lead us to conclude that, although the PS1, APH-1, NCT, and PEN-2 are essential for gamma-secretase activity, the proteolysis of APP-CTF and Notch S2/NEXT are differentially regulated and require the activity of additional cofactors that promote production of AICD, NICD, and A beta.