Amyloid-β peptide is elevated in the brains of patients with Alzheimer disease and is believed to be causative in the disease process. Amyloid-β reduces glutamatergic transmission and inhibits synaptic plasticity, although the underlying mechanisms are unknown. We found that application of amyloid-β promoted endocytosis of NMDA receptors in cortical neurons. In addition, neurons from a genetic mouse model of Alzheimer disease expressed reduced amounts of surface NMDA receptors. Reducing amyloid-β by treating neurons with a γ-secretase inhibitor restored surface expression of NMDA receptors. Consistent with these data, amyloid-β application produced a rapid and persistent depression of NMDA-evoked currents in cortical neurons. Amyloid-β–dependent endocytosis of NMDA receptors required the α-7 nicotinic receptor, protein phosphatase 2B (PP2B) and the tyrosine phosphatase STEP. Dephosphorylation of the NMDA receptor subunit NR2B at Tyr1472 correlated with receptor endocytosis. These data indicate a new mechanism by which amyloid-β can cause synaptic dysfunction and contribute to Alzheimer disease pathology.