Compositions comprising a novel protease capable of cleaving .beta.-amyloid precursor protein (APP) on the amino-terminal side of the .beta.-amyloid peptide therein are provided. The protease is designated .beta.-secretase. Reaction systems comprising .beta.-secretase may be used in screening assays to monitor .beta.-secretase modulated cleavage of APP and to identify .beta.-secretase inhibitors, wherein the .beta.-secretase is in the presence of a suitable polypeptide substrate and cleavage of the substrate determined in the presence and absence of the test substance. Antibodies are raised against peptides of .beta.-secretase. Pharmaceutical compositions and methods comprise compounds identified by screening assays.