Patients with Alzheimer's disease (AD), a common dementia among the aging population, often also suffer from depression. This comorbidity is poorly understood. Although most forms of AD are not genetically inherited, we have identified a new human mutation in the carboxypeptidase E (CPE)/neurotrophic factor-alpha 1 (NF-alpha 1) gene from an AD patient that caused memory deficit and depressive-like behavior in transgenic mice. This mutation consists of three adenosine inserts, introducing nine amino acids, including two glutamines into the mutant protein, herein called CPE-QQ. Expression of CPE-QQ in Neuro2a cells demonstrated that it was not secreted, but accumulated in the endoplasmic reticulum and was subsequently degraded by proteasomes. Expression of CPE-QQ in rat hippocampal neurons resulted in cell death, through increased ER stress and decreased expression of pro-survival protein, BCL-2. Transgenic mice expressing CPE-QQ did not show any difference in the processing enzyme activity of CPE compared with wild-type mice. However, the transgenic mice exhibited poor memory, depressive-like behavior, severely decreased dendrites in the hippocampal CA3 region and medial prefrontal cortex indicative of neurodegeneration, hyperphosphorylation of tau at Ser(396), and diminished neurogenesis in the dentate gyrus at 50 weeks old. All these pathologies are associated with AD and the latter with depression and were observed in 50-week-old mice. Interestingly, the younger CPE-QQ mice (11 weeks old) did not show deficits in dendrite outgrowth and neurogenesis. This study has uncovered a human CPE/NF-alpha 1 gene mutation that could lead to comorbidity of dementia and depression, emphasizing the importance of this gene in cognitive function.