␥-Secretase inhibitors (GSIs) reduce amyloid- (A) peptides but inevitably increase the -C-terminal fragment (-CTFSubchronic dosing with either GSI rather impaired normal cognition in 3-month-old Tg2576 mice, with no inhibition on the processing of other ␥-secretase substrates, such as Notch, N-cadherin, or EphA4, in the brain. LY450139 also impaired normal cognition in wild-type mice; however, the potency was 10-fold lower than that in Tg2576 mice, indicating an APP-dependent mechanism likely with -CTF accumulation. Immunofluorescence studies revealed that the -CTF accumulation was localized in the presynaptic terminals of the hippocampal stratum lucidum and dentate hilus, implying an effect on presynaptic function in the mossy fibers. In contrast, both acute and subchronic dosing with GSM-2 significantly ameliorated memory deficits in Tg2576 mice and did not affect normal cognition in wild-type mice. We demonstrated a clear difference between GSI and GSM in effects on functional consequences, providing new insights into strategies for developing these drugs against Alzheimer's disease.