The Alzheimer's beta-amyloid precursor protein (beta-APP) is widely expressed in neural cells, and in neurons secreted forms of beta-APP (sAPPs) are released from membrane-spanning holo-beta APP in an activity-dependent manner. Secreted APPs can modulate neurite outgrowth, synaptogenesis, synaptic plasticity and cell survival; a signal transduction mechanism of sAPPs may involve modulation of intracellular calcium levels ([Ca2+]i). Here we use whole-cell perforated patch and single-channel patch-clamp analysis of hippocampal neurons to demonstrate that sAPPs suppress action potentials and hyperpolarize neurons by activating high-conductance, charybdotoxin-sensitive K+ channels. Activation of K+ channels by sAPPs was mimicked by a cyclic GMP analogue and sodium nitroprusside and blocked by an antagonist of cGMP-dependent kinase and a phosphatase inhibitor, suggesting that the effect is mediated by cGMP and protein dephosphorylation. Calcium imaging studies indicate that activation of K+ channels mediates the ability of sAPPs to decrease [Ca2+]i. Modulation of neuronal excitability may be a major mechanism by which beta-APP regulates developmental and synaptic plasticity in the nervous system.