Provided are methods of identifying inhibitors of .beta.-secretase that employ modified .beta.-secretase substrates. The modified .beta.-secretase substrates have .beta.-secretase cleavage sites that are altered from wild type. The amino acid sequences of the altered .beta.-secretase cleavage sites contain different amino acids in at least one of the positions P2-P1-P1'-P2' of the .beta.-secretase cleavage site. Many of the modified .beta.-secretase substrates are more efficient substrates for .beta.-secretase than are corresponding substrates having wild-type sequences, that is, these modified substrates are more susceptible to enzymatic breakdown by .beta.-secretase. Recombinant polynucleotide molecules encoding the modified .beta.-secretase substrates are provided. Antibodies that recognize cleavage products of the modified .beta.-secretase substrates are provided. Stable cell lines expressing the modified .beta.-secretase substrates are provided. Transgenic animals expressing the modified .beta.-secretase substrates are provided.