Alzheimer's disease (AD) is characterized by neurofibrillary tangles and extracellular plaques, which consist mainly of beta-amyloid derived from the beta-amyloid precursor protein (APP). An additional feature of AD is axonopathy, which might contribute to impairment of cognitive functions. Specifically, axonal transport defects have been reported in AD animal models, including mice and flies that overexpress APP and tau. Here we demonstrate that the APP-induced traffic jam of vesicles in peripheral nerves of Drosophila melanogaster larvae depends on the four residues NPTY motif in the APP intracellular domain. Furthermore, heterologous expression of Fe65 and JIP1b, scaffolding proteins interacting with the NPTY motif, also perturb axonal transport. Together, these data indicate that JIP1b or Fe65 may be involved in the APP-induced axonal transport defect. Moreover, we have characterized neurotransmission at the neuromuscular junction in transgenic larvae that express human APP. Consistent with the observation that these larvae do not show any obvious movement deficits, we found no changes in basal synaptic transmission. However, short-term synaptic plasticity was affected by overexpression of APP. Together, our results show that overexpression of APP induces partial stalling of axonal transport vesicles, paralleled by abnormalities in synaptic plasticity, which may provide a functional link to the deterioration of cognitive functions observed in AD.