beta-Amyloid precursor protein binding protein 1 (APP-BP1) was previously identified based on its binding to the carboxyl terminal of beta-amyloid precursor protein. In this report, we have discovered that a mutation of dAPP-BP1 (Drosophila ortholog of APP-BP1) hinders tissue development, causes apoptosis in imaginal disc cells, and blocks the NEDD8 conjugation pathway. We show that dAPP-BP1 specifically binds the intracellular domain of APP-like protein (APPL). The dAPP-BP1 mutation partially suppresses the abnormal macrochaete phenotype of Appl(d), while overexpression of dAPP-BP1 causes abnormal macrochaetes. When APPL is overexpressed, the normal bristle pattern in the fly thorax is disturbed and apoptosis is induced in wing imaginal discs. APPL overexpression phenotypes are enhanced by reducing the level of dAPP-BP1. APPL overexpression is shown to inhibit the NEDD8 conjugation pathway. APPL-induced apoptosis is rescued by overexpression of dAPP-BP1. Our data suggest that APPL and dAPP-BP1 interact antagonistically during Drosophila development.