Production of amyloid-beta protein (A beta) is initiated by a beta-secretase that cleaves the A beta precursor protein (APP) at the N terminus of A beta (the beta site). A recently identified aspartyl protease, BACE, cleaves the beta site and at residue 11 within the A beta region of APP. Here we show that BACE2, a BACE homolog, cleaves at the beta site and more efficiently at a different site within AP. The Flemish missense mutation of APP, implicated in a form of familial Alzheimer's disease, is adjacent to this latter site and markedly increases A beta production by BACE2 but not by BACE. BACE and BACE2 respond identically to conservative beta-site mutations, and alteration of a common active site Arg inhibits beta-site cleavage but not cleavage within A beta by both enzymes. These data suggest that BACE2 contributes to A beta production in individuals bearing the Flemish mutation, and that selective inhibition of these highly similar proteases may be feasible and therapeutically advantageous.