BACE1 cleaves the amyloid precursor protein (APP) at the β‐cleavage site (Met671–Asp672) to initiate the generation of amyloid peptide Aβ. BACE1 is also known to cleave APP at a much less well‐characterized β′‐cleavage site (Tyr681–Glu682). We describe here the identification of a novel APP mutation E682K located at this β′‐site in an early onset Alzheimer's disease (AD) case. Functional analysis revealed that this E682K mutation blocked the β′‐site and shifted cleavage of APP to the β‐site, causing increased Aβ production. This work demonstrates the functional importance of APP processing at the β′‐site and shows how disruption of the balance between β‐ and β′‐site cleavage may enhance the amyloidogenic processing and consequentially risk for AD. Increasing exon‐ and exome‐based sequencing efforts will identify many more putative pathogenic mutations without conclusive segregation‐based evidence in a single family. Our study shows how functional analysis of such mutations allows to determine the potential pathogenic nature of these mutations. We propose to classify the E682K mutation as probable pathogenic awaiting further independent confirmation of its association with AD in other patients.