The processing of amyloid precursor protein (APP) by gamma-secretase generates the APP intracellular domain (AICD), which functions as a transcriptional factor for target gene activation following localization into the nucleus. In this study, we demonstrate that AICD could be modified via covalent conjugation with Nedd8, a ubiquitin-like protein. Domain analysis and site-directed substitution of neddylation sites showed that multiple lysine residues of the APP C-terminal C99 fragment including AICD were acceptor sequences for Nedd8 conjugation. AICD-mediated transcriptional activation was inhibited by Nedd8 conjugation. Furthermore, the transcriptional activity of the neddylation-defective AICD mutant was not altered by Nedd8 expression. Nedd8 conjugation of AICD inhibited its interaction with Fe65, and consequently resulted in the impairment of AICD-Fe65-Tip60 complex formation for the transcriptional activation of the target gene. These results illustrate the regulatory mechanisms by which AICD transcriptional activity might be regulated via covalent conjugation with Nedd8. (c) 2007 Elsevier Inc. All rights reserved.