gamma-Secretase cleaves amyloid precursor protein (APP) to generate amyloid-beta (Abeta) peptides, which aggregate in the brain in Alzheimer's disease (AD). gamma-Secretase also cleaves molecules that regulate osteoblast activity, such as Notch and ephrinB2. However, the role of APP in bone is unknown. In this study, the expression, cleavage, and function of APP were investigated during osteogenesis in vitro and in vivo. Expression of all gamma-secretase subunits was confirmed in human primary osteoprogenitors cells, and a significant increase in enzyme activity was observed during osteogenic differentiation using a specific fluorimetric assay. Application of selective inhibitors confirmed gamma-secretase-dependent cleavage of APP within osteogenic cells, and secretion of Abeta by mature osteoblasts was demonstrated with the use of a chemiluminescent immunoassay. Osteoprogenitors showed a selective and significant increase in adhesion to extracellular matrices containing aged Abeta plaques compared with nonaged Abeta peptide controls. Abeta on the endosteal and periosteal surfaces of adult rat ulnae were identified by immunohistochemistry. MicroCT analysis of vertebrae from an AD mouse model, Tg2576, identified a decrease in bone volume, surface area, and thickness compared with wild-type controls. These findings indicate that APP functions as a novel regulator of osteoblast activity and suggest that the mechanisms underlying the pathogenesis of AD may also influence bone.