Two substrates of insulin-degrading enzyme (IDE), amyloid β-protein (Aβ) and insulin, are critically important in the pathogenesis of Alzheimer's disease (AD) and type 2 diabetes mellitus (DM2), respectively. We previously identified IDE as a principal regulator of Aβ levels in neuronal and microglial cells. A small chromosomal region containing a mutant IDE allele has been associated with hyperinsulinemia and glucose intolerance in a rat model of DM2. Human genetic studies have implicated the IDE region of chromosome 10 in both AD and DM2. To establish whether IDE hypofunction decreases Aβ and insulin degradation in vivo and chronically increases their levels, we characterized mice with homozygous deletions of the IDE gene (IDE −/−). IDE deficiency resulted in a >50% decrease in Aβ degradation in both brain membrane fractions and primary neuronal cultures and a similar deficit in insulin degradation in liver. The IDE −/− mice showed increased cerebral accumulation of endogenous Aβ, a hallmark of AD, and had hyperinsulinemia and glucose intolerance, hallmarks of DM2. Moreover, the mice had elevated levels of the intracellular signaling domain of the β-amyloid precursor protein, which was recently found to be degraded by IDE in vitro. Together with emerging genetic evidence, our in vivo findings suggest that IDE hypofunction may underlie or contribute to some forms of AD and DM2 and provide a mechanism for the recently recognized association among hyperinsulinemia, diabetes, and AD.