In this combined bioinformatics, molecular dynamics (MD), and density functional theory study, mechanisms for the hydrolytic cleavage of Val-Ile and Ala-Thr peptide bonds of amyloid precursor protein by the intramembrane aspartyl protease presenilin 1 (PS1) have been elucidated. These processes lead to the formation of 40−42 amino acids long Alzheimer amyloid beta (Aβ) peptides (Aβ40 and Aβ42, respectively). In the absence of an X-ray structure of PS1, based on the substrate specificity and structural characteristics of the active site, another aspartyl protease BACE1 was selected as a model for PS1. The general acid/base mechanism utilized by PS1 is divided into the following two steps: (1) formation of the gem-diol intermediate, and (2) cleavage of the Val-Ile or Ala-Thr peptide bond. The MD simulations indicate that the electronic nature of the cleavage site (Val-Ile and Ala-Thr) plays a critical role in the formation of the enzyme−substrate complex. The calculated barrier (at B3LYP level) for the generation of the gem-diol intermediate in the Val-Ile and Ala-Thr peptide bond cleaving pathways is 16.6 and 24.4 kcal/mol, respectively, and it is endothermic by 6.2 and 17.4 kcal/mol, respectively. This step is the rate-limiting step in both reactions. In the second step, the splitting of the Val-Ile and Ala-Thr bonds encounters the barrier of 10.9 and 21.3 kcal/mol, respectively. The computed energetics exhibit that, in comparison to Aβ42, the generation of Aβ40 is more favorable and supports the experimental observation that the production of Aβ40 is 9 times greater than that of Aβ42.