Alzheimer's disease is an age-related pathology associated with accumulation of amyloid-β peptides, products of enzymatic cleavage of amyloid-β precursor protein (APP) by secretases. Several familial mutations causing early onset of the disease have been identified in the APP transmembrane (TM) domain. The mutations influence production of amyloid-β, but the molecular mechanisms of this effect are unclear. The "Australian" (L723P) mutation located in the C-termini of APP TM domain is associated with autosomal-dominant, early onset Alzheimer's disease. Herein, we describe the impact of familial L723P mutation on the structural-dynamic behavior of APP TM domain studied by high-resolution NMR in membrane-mimicking micelles and augmented by molecular dynamics simulations in explicit lipid bilayer. We found L723P mutation to cause local unfolding of the C-terminal turn of the APP TM domain helix and increase its accessibility to water required for cleavage of the protein backbone by γ-secretase in the ε-site, thus switching between alternative ("pathogenic" and "non-pathogenic") cleavage cascades. These findings suggest a straightforward mechanism of the pathogenesis associated with this mutation, and are of generic import for understanding the molecular-level events associated with APP sequential proteolysis resulting in accumulation of the pathogenic forms of amyloid-β. Moreover, age-related onset of Alzheimer's disease can be explained by a similar mechanism, where the effect of mutation is emulated by the impact of local environmental factors, such as oxidative stress and/or membrane lipid composition. Knowledge of the mechanisms regulating generation of amyloidogenic peptides of different lengths is essential for development of novel treatment strategies of the Alzheimer's disease.