gamma-Secretase activity is associated with a presenilin (PS)-containing macromolecular complex. Whether PS contains the active site of gamma-secretase has been controversial. One challenge is to find PS that is engaged in the active gamma-secretase complex at the cell surface, where some substrates appear to be processed. In this study, we developed an intact cell photolabeling technique that allows the direct visualization of active gamma-secretase at the cell surface. We demonstrated that active gamma-secretase is present in the plasma membrane. Moreover, the PS1 heterodimer is specifically photolabeled at the cell surface by a potent inhibitor that binds to only the active gamma-secretase. We also explored the cellular processing sites of gamma-secretase for amyloid precursor protein (APP) and Notch by using small molecular probes. MRL631, a gamma-secretase inhibitor that is unable to penetrate the cell membrane, significantly blocks gamma-secretase-mediated Notch cleavage but has little effect on APP processing. These results indicate that Notch is processed at the cell surface and that the majority of APP is processed by intracellular gamma-secretase. Furthermore, the fact that inhibitors first target gamma-secretase in the plasma membrane for Notch processing, and not for APP, will have important implications for drug development to treat Alzheimer's disease and cancer.