Compositions comprising a novel protease capable of cleaving &bgr;-amyloid precursor protein (APP) on the amino-terminal side of the &bgr;-amyloid peptide therein are provided. The protease is designated &bgr;-secretase. Reaction systems comprising &bgr;-secretase may be used in screening assays to monitor &bgr;-secretase modulated cleavage of APP and to identify &bgr;-secretase inhibitors, wherein the &bgr;-secretase is in the presence of a suitable polypeptide substrate and cleavage of the substrate determined in the presence and absence of the test substance. Antibodies are raised against peptides of &bgr;-secretase. Pharmaceutical compositions and methods comprise compounds identified by screening assays.