Cleavage of amyloid precursor protein (APP) by β-secretase BACE1 initiates the production and accumulation of neurotoxic amyloid-β peptides, which is widely considered an essential pathogenic mechanism in Alzheimer's disease (AD). Here, we report that BACE1 is essential for normal auditory function. Compared with wild-type littermates, BACE1^−/−mice of either sex exhibit significant hearing deficits, as indicated by increased thresholds and reduced amplitudes in auditory brainstem responses (ABRs) and decreased distortion product otoacoustic emissions (DPOAEs). Immunohistochemistry revealed aberrant synaptic organization in the cochlea and hypomyelination of auditory nerve fibers as predominant neuropathological substrates of hearing loss in BACE1^−/−mice. In particular, we found that fibers of spiral ganglion neurons (SGN) close to the organ of Corti are disorganized and abnormally swollen. BACE1 deficiency also engenders organization defects in the postsynaptic compartment of SGN fibers with ectopic overexpression of PSD95 far outside the synaptic region. During postnatal development, auditory fiber myelination in BACE1^−/−mice lags behind dramatically and remains incomplete into adulthood. We relate the marked hypomyelination to the impaired processing of Neuregulin-1 when BACE1 is absent. To determine whether the cochlea of adult wild-type mice is susceptible to AD treatment-like suppression of BACE1, we administered the established BACE1 inhibitor NB-360 for 6 weeks. The drug suppressed BACE1 activity in the brain, but did not impair hearing performance and, upon neuropathological examination, did not produce the characteristic cochlear abnormalities of BACE1^−/−mice. Together, these data strongly suggest that the hearing loss of BACE1 knock-out mice represents a developmental phenotype.SIGNIFICANCE STATEMENTGiven its crucial role in the pathogenesis of Alzheimer's disease (AD), BACE1 is a prime pharmacological target for AD prevention and therapy. However, the safe and long-term administration of BACE1-inhibitors as envisioned in AD requires a comprehensive understanding of the various physiological functions of BACE1. Here, we report that BACE1 is essential for the processing of auditory signals in the inner ear, as BACE1-deficient mice exhibit significant hearing loss. We relate this deficit to impaired myelination and aberrant synapse formation in the cochlea, which manifest during postnatal development. By contrast, prolonged pharmacological suppression of BACE1 activity in adult wild-type mice did not reproduce the hearing deficit or the cochlear abnormalities of BACE1 null mice.