Gamma-secretase processing of the amyloid-beta precursor protein (APP) releases the amyloid-beta peptide, which is widely held to be involved in the pathogenesis of Alzheimer's disease. This protease is apparently a complex of integral membrane proteins that includes the multi-pass presenilin. Transition-state analogue inhibitors of gamma-secretase are important molecular probes of the enzyme active site. We have identified new transition-state analogues, (hydroxyethy) urea peptidomimetics, that inhibit gamma-secretase activity at submicromolar concentrations in cell culture. The inhibitory activity of a family of such compounds provided further support that gamma-secretase has loose sequence specificity at the active site, and one of these compounds allowed partial purification of the protease complex. In addition, because the site of gamma-secretase cleavage of APP lies within its single transmembrane domain, we designed short peptides based on this domain which assume a helical conformation. These peptides inhibited gamma-secretase in the low micromolar range in cell culture, suggesting that they indeed mimick the APP substrate conformation.