The IFITM3 innate immunity protein directly binds presenilin near the active site and upregulates gamma-secretase activity and the production of amyloid-beta, and IFITM3 is upregulated in patients with late-onset Alzheimer's disease. Innate immunity is associated with Alzheimer's disease(1), but the influence of immune activation on the production of amyloid-beta is unknown(2,3). Here we identify interferon-induced transmembrane protein 3 (IFITM3) as a gamma-secretase modulatory protein, and establish a mechanism by which inflammation affects the generation of amyloid-beta. Inflammatory cytokines induce the expression of IFITM3 in neurons and astrocytes, which binds to gamma-secretase and upregulates its activity, thereby increasing the production of amyloid-beta. The expression of IFITM3 is increased with ageing and in mouse models that express familial Alzheimer's disease genes. Furthermore, knockout of IFITM3 reduces gamma-secretase activity and the formation of amyloid plaques in a transgenic mouse model (5xFAD) of early amyloid deposition. IFITM3 protein is upregulated in tissue samples from a subset of patients with late-onset Alzheimer's disease that exhibit higher gamma-secretase activity. The amount of IFITM3 in the gamma-secretase complex has a strong and positive correlation with gamma-secretase activity in samples from patients with late-onset Alzheimer's disease. These findings reveal a mechanism in which gamma-secretase is modulated by neuroinflammation via IFITM3 and the risk of Alzheimer's disease is thereby increased.