Beta-amyloid (betaA) peptide is strongly implicated in the neurodegeneration underlying Alzheimer's disease, but the mechanisms of neurotoxicity remain controversial. This study establishes a central role for oxidative stress by the activation of NADPH oxidase in astrocytes as the cause of betaA-induced neuronal death. betaA causes a loss of mitochondrial potential in astrocytes but not in neurons. The mitochondrial response consists of Ca2+-dependent transient depolarizations superimposed on a slow collapse of potential. The slow response is both prevented by antioxidants and, remarkably, reversed by provision of glutamate and other mitochondrial substrates to complexes I and II. These findings suggest that the depolarization reflects oxidative damage to metabolic pathways upstream of mitochondrial respiration. Inhibition of NADPH oxidase by diphenylene iodonium or 4-hydroxy-3-methoxy-acetophenone blocks betaA-induced reactive oxygen species generation, prevents the mitochondrial depolarization, prevents betaA-induced glutathione depletion in both neurons and astrocytes, and protects neurons from cell death, placing the astrocyte NADPH oxidase as a primary target of betaA-induced neurodegeneration.