Gene knockout studies in mice suggest that presenilin 1 (PS1) is the major gamma-secretase and that it contributes disproportionately to amyloid beta (Abeta) peptide generation from beta-amyloid precursor protein (APP), whereas PS2 plays a more minor role. Based on this and other observations we hypothesized that familial Alzheimer's disease (FAD) mutations in PS2 would have a dramatic effect on function in order to have an observable effect on Abeta levels in the presence of normal PS1 alleles. Only four of the eight reported FAD mutations in PS2 have altered function in vitro suggesting that the other variants represent rare polymorphisms rather than disease-causing mutations. In support of our hypothesis, the four verified PS2 FAD mutations cause substantial changes in the Abeta 42/40 ratio, comparable with PS1 mutations that cause very-early-onset FAD. Most of the PS2 mutations also cause a significant decrease in Abeta 40, APP C-terminal fragment (CTF)gamma and Notch intracellular domain (NICD) production suggesting that they are partial loss of function mutations. PS2 M239V, its PS1 homolog M233V, and other FAD mutations within transmembrane (TM) 5 of PS1 differentially affect CTFgamma and NICD production suggesting that TM5 of PS are important for gamma-secretase cleavage of APP but not Notch.