The proteolytic processing of amyloid precursor protein (APP) has been linked to sphingolipid‐cholesterol microdomains (rafts). However, the raft proteases that may be involved in APP cleavage have not yet been identified. In this work we present evidence that the protease plasmin is restricted to rafts of cultured hippocampal neurons. We also show that plasmin increases the processing of human APP preferentially at the α‐cleavage site, and efficiently degrades secreted amyloidogenic and non‐amyloidogenic APP fragments. These results suggest that brain plasmin plays a preventive role in APP amyloidogenesis. Consistently, we show that brain tissue from Alzheimer's disease patients contains reduced levels of plasmin, implying that plasmin downregulation may cause amyloid plaque deposition accompanying sporadic Alzheimer's disease.