The amyloid precursor protein (APP) undergoes sequential cleavages to generate various polypeptides, including the amyloid beta (1-42) peptide (Abeta[1-42]), which is believed to play a major role in amyloid plaque formation in Alzheimer's disease (AD). Here we provide evidence that, in contrast with its pathological role when accumulated, endogenous Abeta in normal hippocampi mediates learning and memory formation. Furthermore, hippocampal injection of picomolar concentrations of exogenous Abeta(1-42) enhances memory consolidation. Correlative data suggest that Abeta peptides may exert their function via nicotinic acethylcoline receptors. Hence, Abeta peptides, including Abeta(1-42), play an important physiological role in hippocampal memory formation.