The E693 Delta (Osaka) mutation in APP is linked to familial Alzheimer's disease. While this mutation accelerates amyloid beta (A beta) oligomerization, only patient homozygotes suffer from dementia, implying that this mutation is recessive and causes loss-of-function of amyloid precursor protein (APP). To investigate the recessive trait, we generated a new mouse model by knocking-in the Osaka mutation into endogenous mouse APP. The produced homozygous, heterozygous, and non-knockin littermates were compared for memory, neuropathology, and synaptic plasticity. Homozygotes showed memory impairment at 4 months, whereas heterozygotes did not, even at 8 months. Immunohistochemical and biochemical analyses revealed that only homozygotes displayed intraneuronal accumulation of A beta oligomers at 8 months, followed by abnormal tau phosphorylation, synapse loss, glial activation, and neuron loss. These pathologies were not observed at younger ages, suggesting that a certain mechanism other than A beta accumulation underlies the memory disturbance at 4 months. For the electrophysiology studies at 4 months, high-frequency stimulation evoked long-term potentiation in all mice in the presence of picrotoxin, but in the absence of picrotoxin, such potentiation was observed only in homozygotes, suggesting their GABAergic deficit. In support of this, the levels of GABA-related proteins and the number of dentate GABAergic interneurons were decreased in 4-month-old homozygotes. Since APP has been shown to play a role in dentate GABAergic synapse formation, the observed GABAergic depletion is likely associated with an impairment of the APP function presumably caused by the Osaka mutation. Oral administration of diazepam to homozygotes from 6 months improved memory at 8 months, and furthermore, prevented A beta oligomer accumulation, indicating that GABAergic deficiency is a cause of memory impairment and also a driving force of A beta accumulation. Our findings suggest that the Osaka mutation causes loss of APP function, leading to GABAergic depletion and memory disorder when wild-type APP is absent, providing a mechanism of the recessive heredity.