The cellular factors regulating the generation of beta-amyloid from the amyloid precursor protein (APP) are unknown. Activation of protein kinase C (PKC) by phorbol ester treatment inhibited the generation of the 4-kDa beta-amyloid peptide in transfected COS cells, a human glioma cell line, and human cortical astrocytes. An analogue of diacylglycerol, the endogenous cellular activator of PKC, also inhibited the generation of beta-amyloid. Activation of PKC increased the level of secreted APP in transfected COS cells but did not significantly affect the level of secreted APP in primary human astrocytes or in the glioma cell line. Cell-associated APP and the secreted APP derivative, but not beta-amyloid, were phosphorylated on serine residues. Activation of PKC did not increase the level of APP phosphorylation, suggesting that PKC modulates the proteolytic cleavage of APP indirectly by phosphorylation of other substrates. These results indicate that PKC activation inhibits beta-amyloid production by altering APP processing and suggest that beta-amyloid production can be regulated by the phospholipase C-diacylglycerol signal transduction pathway.