The potential neurotoxicity of soluble forms of amyloid beta peptide (Abeta) as a key factor in early pathogenesis of Alzheimer's disease is being recognized. In addition, there is growing evidence of the essential role of apolipoprotein E (apoE) in amyloid formation, although molecular details of apoE/Abeta interaction are poorly understood. We employed apoE C-terminal (CT) domain comprising residues 201-299 to identify binding location of Abeta(1-42) by fluorescence resonance energy transfer (FRET) and quenching analyses. Native tryptophan (Trp) residues in the apoE CT domain served as FRET donor, whereas N-(iodoacetyl)-N'-(5-sulfo-1-naphthyl)ethylenediamine (AEDANS) covalently attached to a unique cysteine residue substituted at position 4 of Abeta(1-42) (AEDANS-F4C-Abeta(1-42)) served as FRET acceptor. Fluorescence analysis verified that the oligomerization behavior of AEDANS-F4C-Abeta(1-42) was not abrogated by covalent attachment of AEDANS and that apoE CT domain/AEDANS-F4C-Abeta(1-42) association results in formation of a soluble complex. A large decrease in Trp fluorescence emission was noted in mixtures containing apoE CT domain and AEDANS-F4C-Abeta(1-42), accompanied by appearance of sensitized fluorescence emission of AEDANS as a result of intermolecular FRET. An average distance of separation of 22.6 Angstroms between donors and acceptor was calculated. Fluorescence quenching by potassium iodide (KI) did not reveal significant differences in apoE CT domain Trp microenvironment in the absence or the presence of Abeta(1-42). A twofold increase in quenching constant was noted for KI quenching of AEDANS fluorescence emission in the presence of apoE CT domain, indicative of alterations in Abeta conformation upon interaction with apoE CT domain. We propose intermolecular FRET analysis as a discriminating approach to examine apoE/Abeta interaction, a potentially critical factor in early events involved in amyloid formation.