Altered amyloid precursor protein (APP) processing leading to increased production and oligomerization of Aβ may contribute to Alzheimer's disease (AD). Understanding how APP processing is regulated under physiological conditions may provide new insights into AD pathogenesis. Recent reports demonstrate that excitatory neural activity regulates APP metabolism and Aβ levels, although understanding of the molecular mechanisms involved is incomplete. We have investigated whether NMDA receptor activity regulates APP metabolism in primary cultured cortical neurons. We report that a pool of APP is localized to the postsynaptic compartment in cortical neurons and observed partial overlap of APP with both NR1 and PSD-95. NMDA receptor stimulation increased nonamyloidogenic α-secretase-mediated APP processing, as measured by a 2.5-fold increase in cellular α-C-terminal fragment (C83) levels after glutamate or NMDA treatment. This increase was blocked by the NMDA receptor antagonists d-AP5 and MK801 but not by the AMPA receptor antagonist CNQX or the L-type calcium channel blocker nifedipine, was prevented by chelation of extracellular calcium, and was blocked by the α-secretase inhibitor TAPI-1. Cotreatment of cortical neurons with bicuculline and 4-AP, which stimulates glutamate release and activates synaptic NMDA receptors, evoked an MK801-sensitive increase in C83 levels. Furthermore, NMDA receptor stimulation caused a twofold increase in the amount of soluble APP detected in the neuronal culture medium. Finally, NMDA receptor activity inhibited both Aβ1-40 release and Gal4-dependent luciferase activity induced by β-γ-secretase-mediated cleavage of an APP-Gal4 fusion protein. Altogether, these data suggest that calcium influx through synaptic NMDA receptors promotes nonamyloidogenic α-secretase-mediated APP processing.