Background: Presenilin 1(PS1) is the catalytic subunit of gamma-secretase, the enzyme responsible for the A beta C-terminal cleavage site, which results in the production of A beta peptides of various lengths. Production of longer forms of the A beta peptide occur in patients with autosomal dominant Alzheimer disease (AD) due to mutations in presenilin. Many modulators of gamma-secretase function have been described. We hypothesize that these modulators act by a common mechanism by allosterically modifying the structure of presenilin. Methodology/Principal Findings: To test this hypothesis we generated a genetically encoded GFP-PS1-RFP (G-PS1-R) FRET probe that allows monitoring of the conformation of the PS1 molecule in its native environment in live cells. We show that G-PS1-R can be incorporated into the gamma-secretase complex, reconstituting its activity in PS1/2 deficient cells. Using Forster resonance energy transfer (FRET)-based approaches we show that various pharmacological and genetic manipulations that target either gamma-secretase components (PS1, Pen2, Aph1) or gamma-secretase substrate (amyloid precursor protein, APP) and are known to change A beta(42) production are associated with a consistent conformational change in PS1. Conclusions/ Significance: These results strongly support the hypothesis that allosteric changes in PS1 conformation underlie changes in the A beta(42/40) ratio. Direct measurement of physiological and pathological changes in the conformation of PS1/gamma-secretase may provide insight into molecular mechanism of A beta(42) generation, which could be exploited therapeutically.