Amyloid beta (Abeta) is involved in the etiology of Alzheimer's disease (AD) and may contribute to cognitive deficits by increasing internalization of ionotropic glutamate receptors. Striatal-enriched protein tyrosine phosphatase 61 (STEP(61)), which is targeted in part to the postsynaptic terminal, has been implicated in this process. Here we show that STEP(61) levels are progressively increased in the cortex of Tg2576 mice over the first year, as well as in prefrontal cortex of human AD brains. The increased STEP(61) was associated with greater STEP activity, dephosphorylation of phospho-tyr(1472) of the NR2B subunit, and decreased NR1 and NR2B subunits on neuronal membranes. Treatment with Abeta-enriched medium also increased STEP(61) levels and decreased NR1/NR2B abundance in mouse cortical cultures as determined by biotinylation experiments. In STEP knock-out cultures, Abeta treatment failed to induce NMDA receptor internalization. The mechanism for the increase in STEP(61) levels appears to involve the ubiquitin proteasome system. Blocking the proteasome resulted in elevated levels of STEP(61). Moreover, STEP(61)-ubiquitin conjugates were increased in wild-type cortical slices upon Abeta treatment as well as in 12 month Tg2576 cortex. These findings reveal a novel mechanism by which Abeta-mediated accumulation of STEP(61) results in increased internalization of NR1/NR2B receptor that may contribute to the cognitive deficits in AD.