β-Secretase (BACE1), the enzyme responsible for the first and rate-limiting step in the production of amyloid-β peptides, is an attractive target for the treatment of Alzheimer's disease. In this study, we report the application of the de novo fragment-based molecular design program SPROUT to the discovery of a series of nonpeptide BACE1 inhibitors based upon a biphenylacetamide scaffold. The binding affinity of molecules based upon this designed molecular scaffold was increased from an initial BACE1 IC50 of 323 μM to 27 μM following the synthesis of a library of optimized ligands whose structures were refined using the recently developed SPROUT-HitOpt software. Although a number of inhibitors were found to exhibit cellular toxicity, one compound in the series was found to have useful BACE1 inhibitory activity in a cellular assay with minimal cellular toxicity. This work demonstrates the power of an in silico fragment-based molecular design approach in the discovery of novel BACE1 inhibitors.