The amyloid beta-protein precursor (APP) of Alzheimer's disease (AD) is cleaved either by alpha-secretase to generate an N-terminally secreted fragment, or by beta- and gamma-secretases to generate the beta-amyloid protein (Abeta). The accumulation of Abeta in the brain is an important step in the pathogenesis of AD. Alternative mRNA splicing can generate isoforms of APP which contain a Kunitz protease inhibitor (KPI) domain. However, little is known about the physiological function of this domain. In the present study, the metabolic turnover of APP was examined in cultured chick sympathetic neurons. APP was labelled by incubating neurons for 5 h with [35S]methionine and [35S]cysteine. Intracellular labelled APP decayed in a biphasic pattern suggesting that trafficking occurs through two metabolic compartments. The half-lives for APP in each compartment were 1.5 and 5.7 h, respectively. A small fraction (10%) of the total APP was secreted into the culture medium where it was degraded with a half-life of 9 h. Studies using specific protease inhibitors demonstrated that this extracellular breakdown was due to cleavage by a trypsin-like serine protease that was secreted into the culture medium. Significantly, this protease was inhibited by a recombinant isoform of APP (sAPP751), which contains a region homologous to the Kunitz protease inhibitor (KPI) domain. These results suggest that KPI forms of APP regulate extracellular cleavage of secreted APP by inhibiting the activity of a secreted APP-degrading protease.