Presenilin-1 (PS1) gene encodes the catalytic component of γ-secretase, which proteolytically processes several type I transmembrane proteins. We here present evidence that the cytosolic peptide efnB2/CTF2 produced by the PS1/γ-secretase cleavage of efnB2 ligand promotes EphB4 receptor-dependent angiogenesis in vitro. EfnB2/CTF2 increases endothelial cell sprouting and tube formation, stimulates the formation of angiogenic complexes that include VE-cadherin, Raf-1 and Rok-α, and increases MLC2 phosphorylation. These functions are mediated by the PDZ-binding domain of efnB2. Acute downregulation of PS1 or inhibition of γ-secretase inhibits the angiogenic functions of EphB4 while absence of PS1 decreases the VE-cadherin angiogenic complexes of mouse brain. Our data reveal a mechanism by which PS1/γ-secretase regulates efnB2/EphB4 mediated angiogenesis.