The presenilin (PS)-dependent site 3 (S3) cleavage of Notch liberates its intracellular domain (NICD), which is required for Notch signaling. The similar gamma-secretase cleavage of the beta-amyloid precursor protein (betaAPP) results in the secretion of amyloid beta-peptide (Abeta). However, little is known about the corresponding C-terminal cleavage product (CTFgamma). We have now identified CTFgamma in brain tissue, in living cells, as well as in an in vitro system. Generation of CTFgamma is facilitated by PSs, since a dominant-negative mutation of PS as well as a PS gene knock out prevents its production. Moreover, gamma-secretase inhibitors, including one that is known to bind to PS, also block CTFgamma generation. Sequence analysis revealed that CTFgamma is produced by a novel gamma-secretase cut, which occurs at a site corresponding to the S3 cleavage of Notch.