Presenilin heterodimers apparently contain the active site of gamma-secretase, a polytopic aspartyl protease involved in the transmembrane processing of both the Notch receptor and the amyloid-beta precursor protein. Although critical to embryonic development and the pathogenesis of Alzheimer's disease, this protease is difficult to characterize, primarily because it is a multicomponent complex of integral membrane proteins. Here the functional gamma-secretase complex was isolated by using an immobilized active site-directed inhibitor of the protease. Presenilin heterodimers and nicastrin bound specifically to this inhibitor under conditions tightly correlating with protease activity, whereas several other presenilin-interacting proteins (beta-catenin, calsenilin, and presenilin-associated protein) did not bind. Moreover, anti-nicastrin antibodies immunoprecipitated gamma-secretase activity from detergent-solubilized microsomes. Unexpectedly, C83, the major endogenous amyloid-beta precursor protein substrate of gamma-secretase, was also quantitatively associated with the complex. These results provide direct biochemical evidence that nicastrin is a member of the active gamma-secretase complex, indicate that beta-catenin, calsenilin, and presenilin-associated protein are not required for gamma activity, and suggest an unprecedented mechanism of substrate-protease interaction.