The mechanisms by which mutations in the presenilins (PSEN) or the amyloid precursor protein (APP) genes cause familial Alzheimer disease (FAD) are controversial. FAD mutations increase the release of amyloid β (Aβ)42 relative to Aβ40 by an unknown, possibly gain‐of‐toxic‐function, mechanism. However, many PSEN mutations paradoxically impair γ‐secretase and ‘loss‐of‐function’ mechanisms have also been postulated. Here, we use kinetic studies to demonstrate that FAD mutations affect Aβ generation via three different mechanisms, resulting in qualitative changes in the Aβ profiles, which are not limited to Aβ42. Loss of ε‐cleavage function is not generally observed among FAD mutants. On the other hand, γ‐secretase inhibitors used in the clinic appear to block the initial ε‐cleavage step, but unexpectedly affect more selectively Notch than APP processing, while modulators act as activators of the carboxypeptidase‐like (γ) activity. Overall, we provide a coherent explanation for the effect of different FAD mutations, demonstrating the importance of qualitative rather than quantitative changes in the Aβ products, and suggest fundamental improvements for current drug development efforts.