To study amyloid precursor protein (APP) processing we expressed different APP isoforms with and without the Swedish mutation and the membrane inserted C-terminal 100 residues of APP (SPA4CT) in the human neuroblastoma cell line SY5Y. We show that expression of the Swedish mutation results in a significant production of the amyloidogenic intermediate A4CT, which is further processed by gamma-secretase leading to an overproduction of beta A4. Treatment with methylamine and ammonium chloride, inhibitors interfering with intracellular transport mechanisms, inhibits beta-secretase activity without influencing the physiological APP cleavage by alpha-secretase activity. By expressing SPA4CT, we demonstrate that secretion, but not generation, of beta A4 from SPA4CT is inhibited by methylamine resulting in intracellular beta A4. This provides experimental evidence for the intracellular localization of gamma-secretase activity and beta A4 generation.