Nicastrin is a component of the gamma-secretase complex that has been shown to adhere to presenilin-1 (PS1), Notch, and APP. Here we demonstrate that Nicastrin-deficient mice showed a phenotype that is indistinguishable from PS1/PS2 double knock-out mice, whereas heterozygotes were healthy and viable. Fibroblasts derived from Nicastrin-deficient embryos were unable to generate amyloid beta-peptide and failed to release the intracellular domain of APP- or Notch1-Gal4-VP16 fusion proteins. Additionally, C- and N-terminal fragments of PS1 and the C-terminal fragments of PS2 were not detectable in Nicastrin-null fibroblasts, whereas full-length PS1 accumulated in null fibroblasts, indicating that Nicastrin is required for the endoproteolytic processing of presenilins. Interestingly, cells derived from Nicastrin heterozygotes produced relatively higher levels of amyloid beta-peptide whether the source was endogenous mouse or transfected human APP. These data demonstrate that Nicastrin is essential for the gamma-secretase cleavage of APP and Notch in mammalian cells and that Nicastrin has both positive and negative functions in the regulation of gamma-secretase activity.