Cleavage of APP by BACE is the first proteolytic step in the production of Amyloid beta (Abeta, which accumulates in senile plaques in Alzheimer's disease. BACE-cleavage of APP is thought to happen in endosomes. However, there are controversial data whether APP and BACE can already interact on the cell surface dependent on the cholesterol level. To examine whether APP and BACE come into close proximity on the cell surface in living cells, we employed a novel technique by combining time-resolved Förster resonance energy transfer (FRET) measurements with total internal reflection microscopy (TIRET microscopy). Our data indicate that BACE and APP come into close proximity within the cell, but probably not on the cell surface. To analyze the impact of alterations in cholesterol level upon BACE-cleavage, we measured sAPP secretion. Alteration of APP processing and BACE proximity by cholesterol might be explained by alterations in cell membrane fluidity.