Increased generation of amyloid β peptide (Aβ) derived from amyloid precursor protein (APP) is the primary pathological characteristic of Alzheimer’s disease (AD). However, the sub cellular compartment in which APP undergoes cleavage by secretases to generate Aβ is not precisely known. Compelling evidences suggest that amyloidogenic processing of APP occurs in lipid rafts. An indirect support for lipid raft processing of APP includes the localization of Aβ, APP C-terminal fragments (CTFs), APP holoprotein and secretases in the lipid raft microdomains, although few studies failed to find APP in the lipid rafts. The indirect support also comes from both experimental and clinical studies involving modulation of cholesterol levels and its effect on Aβ generation. Moderate depletion of cholesterol results in significant reduction in Aβ levels and increased dietary intake of cholesterol leads to higher levels of Aβ production suggesting that amyloidogenic processing of APP strongly depends on cholesterol levels and therefore on lipid raft integrity. More convincing evidence that lipid rafts are critical for amyloidogenic processing of APP comes from studies using antibody-mediated co-patching of APP and BACE1 which results in lipid raft association of APP and BACE1 and increased Aβ generation. Further, an endosome/lipid raft targeting of β-secretase inhibitor by sterol-mediated anchoring leading to reduced Aβ generation also suggests that lipid rafts are pivotal for amyloidogenic processing of APP. In the absence of an effective therapy for AD, proteins responsible for delivery of APP to lipid rafts including LRP, RanBP9 and ApoER2 may be excellent therapeutic targets in AD.