AbstractThe intramembrane protease γ‐secretase has broad physiological functions, but also contributes to Notch‐dependent tumors and Alzheimer's disease. While γ‐secretase cleaves numerous membrane proteins, only few nonsubstrates are known. Thus, a fundamental open question is how γ‐secretase distinguishes substrates from nonsubstrates and whether sequence‐based features or post‐translational modifications of membrane proteins contribute to substrate recognition. Using mass spectrometry‐based proteomics, we identified several type I membrane proteins with short ectodomains that were inefficiently or not cleaved by γ‐secretase, including ‘pituitary tumor‐transforming gene 1‐interacting protein’ (PTTG1IP). To analyze the mechanism preventing cleavage of these putative nonsubstrates, we used the validated substrate FN14 as a backbone and replaced its transmembrane domain (TMD), where γ‐cleavage occurs, with the one of nonsubstrates. Surprisingly, some nonsubstrate TMDs were efficiently cleaved in the FN14 backbone, demonstrating that a cleavable TMD is necessary, but not sufficient for cleavage by γ‐secretase. Cleavage efficiencies varied by up to 200‐fold. Other TMDs, including that of PTTG1IP, were still barely cleaved within the FN14 backbone. Pharmacological and mutational experiments revealed that the PTTG1IP TMD is palmitoylated, which prevented cleavage by γ‐secretase. We conclude that the TMD sequence of a membrane protein and its palmitoylation can be key factors determining substrate recognition and cleavage efficiency by γ‐secretase.