Regulated intramembrane proteolysis is a novel mechanism involving proteases that hydrolyze their substrates in a hydrophobic environment. Presenilin (PS) 1 and PS 2 are required for intramembrane cleavage of an increasing number of type I membrane proteins, including the amyloid precursor protein of Alzheimer's disease and the Notch receptor, which signals during differentiation and development. Mutagenesis, affinity labeling, biochemical isolation, and reconstitution in cells reveal that PS, in complex with co-factors nicastrin, APH-1 and PEN-2, apparently contains the active site of gamma-secretase, a novel membrane aspartyl protease. In addition, other related aspartyl proteases have been identified. These include members of the type-4 prepilin peptidase family in bacteria, which are known proteases and carry a GD motif conserved in PS. A group of multi-pass membrane proteins found in eukaryotes also contain YD and LGXGD motifs in two transmembrane domains that are conserved in PS and postulated to constitute an aspartyl protease active site. Among these is signal peptide peptidase (SPP), which cleaves remnant signal peptides derived from signal-peptidase-mediated ectodomain shedding. SPP cuts type II membrane proteins, illustrating that PS-like proteases play a key role in intramembrane proteolysis of single-pass membrane proteins oriented in either direction.