Sequential proteolytic cleavage of the amyloid precursor protein (APP) by β-site APP-cleaving enzyme 1 (BACE1) and the γ-secretase complex produces the amyloid-β peptide (Aβ), which is believed to play a critical role in the pathology of Alzheimer's disease (AD). The aspartyl protease BACE1 catalyzes the rate-limiting step in the production of Aβ, and as such it is considered to be an important target for drug development in AD. The development of a BACE1 inhibitor therapeutic has proven to be difficult. The active site of BACE1 is relatively large. Consequently, to achieve sufficient potency, many BACE1 inhibitors have required unfavorable physicochemical properties such as high molecular weight and polar surface area that are detrimental to efficient passage across the blood-brain barrier. Using a rational drug design approach we have designed and developed a new series of hydroxyethylamine-based inhibitors of BACE1 capable of lowering Aβ levels in the brains of rats after oral administration. Herein we describe the in vitro and in vivo characterization of two of these molecules and the overall relationship of compound properties [e.g., in vitro permeability, P-glycoprotein (P-gp) efflux, metabolic stability, and pharmacological potency] to the in vivo pharmacodynamic effect with more than 100 compounds across the chemical series. We demonstrate that high in vitro potency for BACE1 was not sufficient to provide central efficacy. A combination of potency, high permeability, low P-gp-mediated efflux, and low clearance was required for compounds to produce robust central Aβ reduction after oral dosing.