Membrane-bound BACE1 naturally cleaves its transmembrane substrate amyloid precursor protein (APP) at the two adjacent beta- and beta'-sites. Cleavage at these two sites generates the heterogeneous N-terminal end of APP C-terminal fragments that are further processed by gamma-secretase to release Abeta-(1-40/42) or Abeta-(11-40/42). The significance underlying Abeta-(11-40/42) in Alzheimer's disease pathogenesis has remained to be experimentally elucidated, but increased production of Abeta-(1-40/42) has been broadly demonstrated to contribute to amyloid depositions in senile plaques. In this study, we show that the cleavage of APP at the beta-site by BACE1 is readily disrupted through limited structural twists, whereas the beta'-site is relatively better positioned to gain access to the BACE1 catalytic cavity. Radical insertion or deletion of residues between beta- and beta'-site also favors cleavage of APP at the beta'-site. On the other hand, either lengthening or shortening the loop region of BACE1 has a minor impact on the selective cleavage of APP at these two adjacent sites, but significantly shortening the loop region impairs the ability of BACE1 to process APP at both sites. Thus, processing of APP by BACE1 is clearly dependent on a mutual structural compatibility in addition to the sequence feature. The knowledge gained from this study will potentially offer an opportunity for rational design of small molecule drugs to block the cleavage of APP specifically at the beta-site while not disturbing the functions of other cellular aspartyl proteases.