Recent studies indicate that nicastrin (NCT) and presenilins form functional components of a multimeric gamma-secretase complex required for the regulated intramembraneous proteolysis of Notch and beta-amyloid (Abeta) precursor protein (APP). To determine whether nicastrin is required for proteolytic processing of Notch and APP in mammals and the role of nicastrin in presenilin/gamma-secretase complex assembly, we generated nicastrin-deficient (NCT-/-) mice and derived fibroblasts from NCT-/- embryos. Nicastrin-null embryos died by embryonic day 10.5 and exhibited several patterning defects, including abnormal somite segmentation, phenotypes that are reminiscent of embryos lacking Notch1 or both presenilins. Importantly, secretion of Abeta peptides is abolished in NCT-/- fibroblasts, whereas it is reduced by approximately 50% in NCT+/- cells; the failure to generate Abeta peptides in NCT-/- cells is accompanied by destabilization of the presenilin/gamma-secretase complex and accumulation of APP-C-terminal fragments. Moreover, APP trafficking analysis in NCT-/- fibroblasts revealed a significant delay in the rate of APP reinternalization compared with that of control cells. Together, these results establish that nicastrin is an essential component of the multimeric gamma-secretase complex in mammals required for both gamma-secretase activity and APP trafficking and suggest that nicastrin may be a valuable therapeutic target for Alzheimer's disease.