-APP cleaving enzyme (BACE) is responsible for the first of two proteolytic cleavages ofthe APP protein that together lead to the generation of the Alzheimer's disease-associated A
peptide. Itis widely believed that halting the production of A
peptide, by inhibition of BACE, is an attractivetherapeutic modality for the treatment of Alzheimer's disease. BACE is an aspartyl protease, and there issignificant effort in the pharmaceutical community to apply traditional design methods to the developmentof active site-directed inhibitors of this enzyme. We report here the discovery of a ligand binding pocketwithin the catalytic domain of BACE that is distinct from the enzymatic active site (i.e., an exosite).Peptides, initially identified from combinatorial phage peptide libraries, contain the sequence YPYF(I/L)P(L/I) and bind specifically to this exosite, even in the presence of saturating concentrations of activesite-directed inhibitors. Binding of peptides to the BACE exosite leads to a concentration-dependentinhibition of proteolysis for APP-related, protein-based substrates of BACE. The discovery of this exositeopens new opportunities for the identification and development of novel and potentially selective smallmolecule inhibitors of BACE that act through exosite, rather than active site, binding interactions.