The beta-secretase, BACE, is a membrane spanning aspartic protease, which cleaves the amyloid precursor protein (APP) in the first step of proteolytic processing leading to the formation of the neurotoxic beta-amyloid peptide (Abeta). Previous results have suggested that the regulation of beta-secretase and BACE access to APP is lipid dependent, and involves lipid rafts. Using the baculovirus expression system, we have expressed recombinant human full-length BACE in insect cells and purified milligram amounts to homogeneity. We have studied partitioning of fluorophor-conjugated BACE between the liquid ordered and disordered phases in giant (10-150 mum) unilamellar vesicles, and found approximately 20% to associate with the raft-like, liquid-ordered phase; the fraction associated with liquid-ordered phase increased upon cross-linking of raft lipids. To examine involvement of individual lipid species in modulating BACE activity, we have reconstituted the purified BACE in large ( approximately 100 nm) unilamellar vesicles, and determined its specific activity in vesicles of various lipid compositions. We have identified 3 groups of lipids that stimulate proteolytic activity of BACE: 1) neutral glycosphingolipids (cerebrosides), 2) anionic glycerophospholipids, and 3) sterols (cholesterol).