The full-length and ectodomain forms of beta-site APP cleavage enzyme (BACE) have been cloned, expressed in Sf9 cells, and purified to homogeneity. This aspartic protease cleaves the amyloid precursor protein at the beta-secretase site, a critical step in the Alzheimer's disease pathogenesis. Comparison of BACE to other aspartic proteases such as cathepsin D and E, napsin A, pepsin, and renin revealed little similarity with respect to the substrate preference and inhibitor profile. On the other hand, these parameters are all very similar for the homologous enzyme BACE2. Based on a collection of decameric substrates, it was found that BACE has a loose substrate specificity and that the substrate recognition site in BACE extends over several amino acids. In common with the aspartic proteases mentioned above, BACE prefers a leucine residue at position P1. Unlike cathepsin D etc., BACE accepts polar or acidic residues at positions P2'0 and P1 but prefers bulky hydrophobic residues at position P3. BACE displays poor kinetic constants toward its known substrates (wild-type substrate, SEVKM/DAEFR, K(m) = 7 microm, K(cat) = 0.002 s(-1); Swedish mutant, SEVNL/DAEFR, K(m) = 9 microm, K(cat) = 0.02 s(-1)). A new substrate (VVEVDA/AVTP, K(m) = 1 microm, K(cat) = 0.004) was identified by serendipity.