The amyloid precursor protein (APP) is widely distributed within the CNS, where it is expressed in both neurons and glia. We have isolated axolemma and periaxolemmal-myelin from rat brain and have determined by Western blot that APPs, Mr 100-110 kDa, are major constituents of these membrane. Isolation of axolemma, periaxolemmal-myelin, and compact myelin show that while APP represents 1 and 0.6% of the proteins of these respective membranes, it is absent from compact myelin. These results indicate that APP transported down the axon is deposited at sites in the axolemma as well as the synapse, and that within the myelin complex, APP is targeted to the periaxolemmal domain. Both axolemma and periaxolemmal-myelin contained a 10.5 kDa APP peptide which, based on reactivity with anti-C-terminal APP antibodies but not with anti-N-terminal antibody, appears to be a membrane-associated C-terminal fragment. Western blots with antibodies to Alzheimer precursor-like proteins (APLP) indicate that APP immune reactivity is not a result of cross reactivity with APLPs. Isolation of axolemma from human autopsy material showed nearly identical results with a clear enrichment, relative to homogenate, of APP Mr 100-110 and the 10.5 kDa C-terminal peptide. The demonstration of APP in axolemma and periaxolemmal-myelin was replicated in membrane isolated from bovine brain. Bovine studies were extended to analysis of white matter clathrin-coated vesicles; these data show that coated vesicles isolated from white matter, under conditions that previous studies indicate are largely endocytic vesicles, contain levels of APP comparable to that found in axolemma and periaxolemmal-myelin. In addition, these vesicles contain cysteinyl and aspartyl proteases. Incubation of axolemma with cathepsin B at pH 6.0 caused a rapid loss in the immune reactivity of APP Mr 100-110 and Mr 10.5 when analyzed with antibodies to APP672-695. This appears to be the result of hydrolysis within the epitope and not proteolysis of APP or the C-terminal peptide, since no loss of reactivity was observed when analyzed with antibodies to sites more distal to the C-terminus. Thus, cathepsin B hydrolyses membrane bound APP close to the C-terminus and may be a useful tool for altering C-terminal APP function.