A central question in Alzheimer's disease concerns the mechanism by which β-amyloid contributes to neuropathology, and in particular whether intracellular versus extracellular β-amyloid plays a critical role. Alzheimer transgenic mouse studies demonstrate brain dysfunction, as β-amyloid levels rise, months before the appearance of β-amyloid plaques. We have now used immunoelectron microscopy to determine the subcellular site of neuronal β-amyloid in normal and Alzheimer brains, and in brains from Alzheimer transgenic mice. We report that β-amyloid 42 localized predominantly to multivesicular bodies of neurons in normal mouse, rat, and human brain. In transgenic mice and human Alzheimer brain, intraneuronal β-amyloid 42 increased with aging and β-amyloid 42 accumulated in multivesicular bodies within presynaptic and especially postsynaptic compartments. This accumulation was associated with abnormal synaptic morphology, before β-amyloid plaque pathology, suggesting that intracellular accumulation of β-amyloid plays a crucial role in Alzheimer's disease.