The processing of Amyloid precursor protein (APP) is multifaceted, comprising of protein transport, internalization and sequential proteolysis. However, the exact mechanism of APP intracellular trafficking and distribution remains unclear. To determine the interaction between sortilin and APP and the effect of sortilin on APP trafficking and processing, we studied the binding site and its function by mapping experiments, colocalization, coimmunoprecipitation and sucrose gradient fractionation. We identified for the first time that sortilin interacts with APP at both N- and C-terminal regions. The sortilin-FLVHRY (residues 787-792) and APP-NPTYKFFE (residues 759-766) motifs are crucial for the C-terminal interaction. We also found that lack of the FLVHRY motif reduces APP lysosomal targeting and increases APP distribution in lipid rafts in co-transfected HEK293 cells. These results are consistent with our in vivo data where sortilin knockout mice showed a decrease of APP lysosomal distribution and an increase of APP in lipid rafts. We further confirmed that overexpression of sortilin-FLVHRY mutants failed to rescue the lysosomal degradation of APP. Thus, our data suggests that sortilin is implicated in APP lysosomal and lipid raft targeting via its carboxyl-terminal F/YXXXXF/Y motif. Our study provides new molecular insights into APP trafficking and processing.