The main component of the amyloid plaques found in the brains of those with Alzheimer's disease (AD) is a polymerized form of the β-amyloid peptide (Aβ) and is considered to play a central role in the pathogenesis of this neurodegenerative disorder. Aβ is derived from the proteolytic processing of the amyloid precursor protein (APP). Beta site APP-cleaving enzyme, BACE1 (also known as β-secretase) is a membrane-bound aspartyl protease responsible for the initial step in the generation of Aβ peptide and is thus a prime target for therapeutic intervention. Substantive evidence now indicates that the processing of APP by BACE1 is regulated by the intracellular sorting of the enzyme and, moreover, perturbations in these intracellular trafficking pathways have been linked to late-onset AD. In this review, we highlight the recent advances in the understanding of the regulation of the intracellular sorting of BACE1 and APP and illustrate why the trafficking of these cargos represent a key issue for understanding the membrane-mediated events associated with the generation of the neurotoxic Aβ products in AD.