γ-Secretase inhibitors (GSIs) reduce amyloid-β (Aβ) peptides but inevitably increase the β-C-terminal fragment (β-CTF) of amyloid precursor protein (APP), potentially having undesirable effects on synapses. In contrast, γ-secretase modulators (GSMs) reduce Aβ42 without increasing β-CTF. Although the Aβ-lowering effects of these compounds have been extensively studied, little effort has been made to investigate their effects on cognition. Here, we compared the effects of two GSIs--(2S)-2-hydroxy-3-methyl-N-[(2S)-1-{[(1S)-3-methyl-2-oxo-2,3,4,5-tetrahydro-1H-3-benzazepin-1-yl]amino}-1-oxopropan-2-yl]butanamide (LY450139, semagacestat) and (2R)-2-[[(4-chlorophenyl)sulfonyl][[2-fluoro-4-(1,2,4-oxazol-3-yl)phenyl]methyl]amino-5,5,5-trifluoropentanamide (BMS-708163)--and a second-generation GSM [{(2S,4R)-1-[(4R)-1,1,1-trifluoro-7-methyloctan-4-yl]-2-[4-(trifluoromethyl)phenyl]piperidin-4-yl}acetic acid (GSM-2)] on spatial working memory in APP-transgenic (Tg2576) and nontransgenic mice using the Y-maze task. While acute dosing with either GSI ameliorated memory deficits in 5.5-month-old Tg2576 mice, these effects disappeared after 8 d subchronic dosing. Subchronic dosing with either GSI rather impaired normal cognition in 3-month-old Tg2576 mice, with no inhibition on the processing of other γ-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 β-CTF accumulation. Immunofluorescence studies revealed that the β-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.