The C-terminus Hsp70 interacting protein (CHIP) has dual function as both co-chaperone and ubiquitin ligase. CHIP is increasingly implicated in the biology of polyglutamine expansion disorders, Parkinson's disease and tau protein in Alzheimer's disease. We investigated the involvement of CHIP in the metabolism of the beta-amyloid precursor protein and its derivative beta-amyloid (Abeta). Using immunoprecipitation, fluorescence localization and crosslinking methods, endogenous CHIP and betaAPP interact in brain and cultured skeletal myotubes as well as when they are expressed in stable HEK cell lines. Their interaction is confined to Golgi and ER compartments. In the presence of the proteasome inhibitor with MG132, endogenous and expressed betaAPP levels are significantly increased and accordingly, the interaction with CHIP enhanced. Concurrently, levels of Hsp70 were most consistently induced by proteasome inhibition among the various heat shock proteins (HSPs) tested. Thus, complexes of CHIP, Hsp70 and holo-betaAPP (as well as C-terminal fragments) were stabilized by the action of MG132. Moreover, CHIP itself is shown to both increase cellular holo-betaAPP levels and protect it from oxidative stress and degradation. Interestingly, CHIP also promotes the association of ubiquitin with betaAPP, implying that a smaller pool of betaAPP is destined for proteasomal processing. In neuronal cultures, CHIP and Hsp70/90 expression reduce steady-state cellular Abeta levels and hasten its degradation in pulse-chase experiments. The functional significance of CHIP and HSP interactions, especially with Hsp70, was tested using siRNA and in neuronal cells where protection from Abeta-induced toxicity is shown. We conclude that CHIP, as a bimolecular switch, interacts with HSP to stabilize normal holo-betaAPP on the one hand while also assisting in the ubiquitination of a subpopulation of betaAPP molecules that are destined for proteasome degradation. CHIP also hastens the clearance of Abeta in a manner consistent with its known neuroprotective properties.