A variety of investigations have led to the conclusion that presenilins (PS) play a critical role in intramembranous, gamma-secretase proteolysis of selected type I membrane proteins, including Notch1 and amyloid precursor protein (APP). We now show that the generation of the S3/Notch intracellular domain and APP-carboxyl-terminal fragment gamma (CTFgamma) derivatives are dependent on PS expression and inhibited by a highly selective and potent gamma-secretase inhibitor. Unexpectedly, the APP-CTFgamma derivative is generated by processing between Leu-645 and Val-646 (of APP(695)), several amino acids carboxyl-terminal to the scissile bonds for production of amyloid beta protein peptides. Although the relationship of APP-CTFgamma to the production of amyloid beta protein peptides is not known, we conclude that in contrast to the highly selective PS-dependent processing of Notch, the PS-dependent gamma-secretase processing of APP is largely nonselective and occurs at multiple sites within the APP transmembrane domain.