Alzheimer's disease (AD) is characterized by progressive accumulation of misfolded proteins, which form senile plaques and neurofibrillary tangles, and the release of inflammatory mediators by innate immune responses. β-Amyloid peptide (Aβ) is derived from sequential processing of the amyloid precursor protein (APP) by membrane-bound proteases, namely the β-secretase, BACE1, and γ-secretase. Membrane trafficking plays a key role in the regulation of APP processing as both APP and the processing secretases traffic along distinct pathways. Genome wide sequencing studies have identified several AD susceptibility genes which regulate membrane trafficking events. To understand the pathogenesis of AD it is critical that the cell biology of APP and Aβ production in neurons is well defined. This review discusses recent advances in unravelling the membrane trafficking events associated with the production of Aβ, and how AD susceptible alleles may perturb the sorting and transport of APP and BACE1. Mechanisms whereby inflammation may influence APP processing are also considered.