BACE is a transmembrane protease with beta-secretase activity that cleaves the amyloid precursor protein (APP). After BACE cleavage, APP becomes a substrate for gamma-secretase, leading to release of amyloid-beta peptide (Abeta), which accumulates in senile plaques in Alzheimer disease. APP and BACE are co-internalized from the cell surface to early endosomes. APP is also known to interact at the cell surface and be internalized by the low density lipoprotein receptor-related protein (LRP), a multifunctional endocytic and signaling receptor. Using a new fluorescence resonance energy transfer (FRET)-based assay of protein proximity, fluorescence lifetime imaging (FLIM), and co-immunoprecipitation we demonstrate that the light chain of LRP interacts with BACE on the cell surface in association with lipid rafts. Surprisingly, the BACE-LRP interaction leads to an increase in LRP C-terminal fragment, release of secreted LRP in the media and subsequent release of the LRP intracellular domain from the membrane. Taken together, these data suggest that there is a close interaction between BACE and LRP on the cell surface, and that LRP is a novel BACE substrate.