Mitochondria are central in the regulation of cell death. Apart from providing the cell with ATP, mitochondria also harbor several death factors that are released upon apoptotic stimuli. Alterations in mitochondrial functions, increased oxidative stress, and neurons dying by apoptosis have been detected in Alzheimer's disease patients. These findings suggest that mitochondria may trigger the abnormal onset of neuronal cell death in Alzheimer's disease. We previously reported that presenilin 1 (PS1), which is often mutated in familial forms of Alzheimer's disease, is located in mitochondria and hypothesized that presenilin mutations may sensitize cells to apoptotic stimuli at the mitochondrial level. Presenilin forms an active gamma-secretase complex together with Nicastrin (NCT), APH-1, and PEN-2, which among other substrates cleaves the beta-amyloid precursor protein (beta-APP) generating the amyloid beta-peptide and the beta-APP intracellular domain. Here we have identified dual targeting sequences (for endoplasmic reticulum and mitochondria) in NCT and showed expression of NCT in mitochondria by immunoelectron microscopy. We also showed that NCT together with APH-1, PEN-2, and PS1 form a high molecular weight complex located in mitochondria. gamma-secretase activity in isolated mitochondria was demonstrated using C83 (alpha-secretase-cleaved C-terminal 83-residue beta-APP fragment from BD8 cells lacking presenilin and thus gamma-secretase activity) or recombinant C100-Flag (C-terminal 100-residue beta-APP fragment) as substrates. Both systems generated an APP intracellular domain, and the activity was inhibited by the gamma-secretase inhibitors l-685,458 or Compound E. This novel localization of NCT, PS1, APH-1, and PEN-2 expands the role and importance of gamma-secretase activity to mitochondria.