Proteolytic processing of the amyloid precursor protein (APP) generates large soluble APP derivatives, β-amyloid (Aβ) peptides, and APP intracellular domain. Expression of the extracellular sequences of APP or its Caenorhabditis elegans counterpart has been shown to be sufficient in partially rescuing the CNS phenotypes of the APP-deficient mice and the lethality of the apl-1 null C. elegans, respectively, leaving open the question as what is the role of the highly conserved APP intracellular domain? To address this question, we created an APP knock-in allele in which the mouse Aβ sequence was replaced by the human Aβ. A frameshift mutation was introduced that replaced the last 39 residues of the APP sequence. We demonstrate that the C-terminal mutation does not overtly affect APP processing and amyloid pathology. In contrast, crossing the mutant allele with APP-like protein 2 (APLP2)-null mice results in similar neuromuscular synapse defects and early postnatal lethality as compared with mice doubly deficient in APP and APLP2, demonstrating an indispensable role of the APP C-terminal domain in these development activities. Our results establish an essential function of the conserved APP intracellular domain in developmental regulation, and this activity can be genetically uncoupled from APP processing and Aβ pathogenesis.