Production of amyloid-beta protein (Abeta) is initiated by a beta-secretase that cleaves the Abeta precursor protein (APP) at the N terminus of Abeta (the beta site). A recently identified aspartyl protease, BACE, cleaves the beta site and at residue 11 within the Abeta region of APP. Here we show that BACE2, a BACE homolog, cleaves at the beta site and more efficiently at a different site within Abeta. The Flemish missense mutation of APP, implicated in a form of familial Alzheimer's disease, is adjacent to this latter site and markedly increases Abeta production by BACE2 but not by BACE. BACE and BACE2 respond identically to conservative beta-site mutations, and alteration of a common active site Arg inhibits beta-site cleavage but not cleavage within Abeta by both enzymes. These data suggest that BACE2 contributes to Abeta production in individuals bearing the Flemish mutation, and that selective inhibition of these highly similar proteases may be feasible and therapeutically advantageous.