Proteolytic processing of the amyloid precursor protein (APP) leads to amyloid-β (Aβ) peptides. So far, the mechanism of APP processing is insufficiently characterized at the molecular level. Whereas the knowledge of Aβ generation by several proteases has been expanded, the contribution of the Kunitz-type protease inhibitor domain (KPI) present in two major APP isoforms to the complex proteolytic processing of APP is poorly understood. In this study, we have identified KPI-containing APP as a very potent, slow-binding inhibitor for the membrane-bound proteolytic regulator of iron homeostasis matriptase-2 by forming stable complexes with its target protease in HEK cells. Inhibition and complex formation depend on the intact KPI domain. By inhibiting matriptase-2, KPI-containing APP is protected from matriptase-2-mediated proteolysis within the Aβ region, thus preventing the generation of N-terminally truncated Aβ.