The amyloid beta-protein (A beta), implicated in the pathogenesis of Alzheimer's disease (AD), is a proteolytic metabolite generated by the sequential action of beta- and gamma-secretases on the amyloid precursor protein (APP). The two main forms of A beta are 40- and 42-amino acid C-terminal variants, A beta(40) and A beta(42) We recently described a difluoro ketone peptidomimetic (1) that blocks A beta production at the gamma-secretase level [Wolfe, M. S., et al. (1998) J. Med, Chem. 41, 6-9]. Although designed to inhibit A beta(42) production, 1 also effectively blocked A beta(40) formation. Various amino acid changes in 1 still resulted in inhibition of A beta(40) and A beta(42) production, suggesting relatively loose sequence specificity by gamma-secretase. The alcohol counterparts of selected difluoro ketones also lowered A beta levels, indicating that the ketone carbonyl is not essential for activity and suggesting that these compounds inhibit an aspartyl protease. Selected compounds inhibited the aspartyl protease cathepsin D but not the cysteine protease calpain, corroborating previous suggestions that gamma-secretase is an aspartyl protease with some properties similar to those of cathepsin D, Also, since the gamma-secretase cleavage sites on APP are within the transmembrane region, we consider the hypothesis that this region binds to gamma-secretase as an alpha-helix and discuss the implications of this model for the mechanism of certain forms of hereditary AD.