Alzheimer's disease (AD) is the most common cause of age-related dementia. Pathologically, AD is characterized by the deposition in the brain of amyloid-beta peptides derived from proteolysis of amyloid precursor protein (APP) by beta-site APP cleaving enzyme 1 (BACE1) and gamma-secretase. A growing body of evidence implicates cholesterol and cholesterol-rich membrane microdomains in amyloidogenic processing of APP. Here, we review recent findings regarding the association of BACE1, gamma-secretase and APP in lipid rafts, and discuss potential therapeutic strategies for AD that are based on knowledge gleaned from the membrane environment that fosters APP processing.