A hallmark of Alzheimer's disease is the deposition of plaques of amyloid beta peptide (Abeta) in the brain. Abeta is thought to be formed from the amyloid precursor protein (APP) in cholesterol-enriched membrane rafts, and cellular cholesterol depletion decreases Abeta formation. The liver X receptors (LXR) play a key role in regulating genes that control cellular cholesterol efflux and membrane composition and are widely expressed in cells of the central nervous system. We show that treatment of APP-expressing cells with LXR activators reduces the formation of Abeta. LXR activation resulted in increased levels of the ATP-binding cassette transporter A1 (ABCA1) and stearoyl CoA desaturase, and expression of these genes individually decreased formation of Abeta. Expression of ABCA1 led to both decreased beta-cleavage product of APPSw (i.e. C99 peptide) and reduced gamma-secretase-cleavage of C99 peptide. Remarkably, these effects of ABCA1 on APP processing were independent of cellular lipid efflux. LXR and ABCA1-induced changes in membrane lipid organization had favorable effects on processing of APP, suggesting a new approach to the treatment of Alzheimer's disease.