beta-Secretase plays a critical role in beta-amyloid formation and thus provides a therapeutic target for Alzheimer's disease. Inhibitor design has usually focused on active-site binding, neglecting the subcellular localization of active enzyme. We have addressed this issue by synthesizing a membrane-anchored version of a beta-secretase transition-state inhibitor by linking it to a sterol moiety. Thus, we targeted the inhibitor to active beta-secretase found in endosomes and also reduced the dimensionality of the inhibitor, increasing its local membrane concentration. This inhibitor reduced enzyme activity much more efficiently than did the free inhibitor in cultured cells and in vivo. In addition to effectively targeting beta-secretase, this strategy could also be used in designing potent drugs against other membrane protein targets.