Progressive cerebral deposition of the amyloid β-protein (Aβ) is believed to play a pivotal role in the pathogenesis of Alzheimer's disease (AD). The highly amyloidogenic 42-residue form of Aβ (Aβ₄₂) is the first species to be deposited in both sporadic and familial AD. Mutations in two familial AD-linked genes, presenilins 1 (PS1) and 2 (PS2), selectively increase the production of Aβ₄₂ in cultured cells and the brains of transgenic mice, and gene deletion of PS1 shows that it is required for normal γ-secretase cleavage of the β-amyloid precursor protein (APP) to generate Aβ. To establish the subcellular localization of the PS1 regulation of APP processing to Aβ, fibroblasts from PS1 wild-type (wt) or knockout (KO) embryos as well as Chinese hamster ovary (CHO) cells stably transfected with wt or mutant PS1 were subjected to subcellular fractionation on discontinuous Iodixanol gradients. APP C-terminal fragments (CTF) were markedly increased in both endoplasmic reticulum- (ER-) and Golgi-rich fractions of fibroblasts from KO mice; moreover, similar increases were documented directly in KO brain tissue. No change in the subcellular distribution of full-length APP was detectable in fibroblasts lacking PS1. In CHO cells, a small portion of APP, principally the N-glycosylated isoform, formed complexes with PS1 in both ER- and Golgi-rich fractions, as detected by coimmunoprecipitation. When the same fractions were analyzed by enzyme-linked immunosorbent assays for Aβ_total and Aβ₄₂, Aβ₄₂ was the major Aβ species in the ER fraction (Aβ₄₂:Aβ_total ratio 0.5−1.0), whereas absolute levels of both Aβ₄₂ and Aβ₄₀ were higher in the Golgi fraction and the Aβ₄₂:Aβ_toal ratio was 0.05−0.16 there. Mutant PS1 significantly increased Aβ₄₂ levels in the Golgi fraction. Our results indicate PS1 and APP can interact in the ER and Golgi, where PS1 is required for proper γ-secretase processing of APP CTFs, and that PS1 mutations augment Aβ₄₂ levels principally in Golgi-like vesicles.