NMDA receptors (NMDARs) are ionotropic receptors crucial for brain information processing. Yet, evidence also supports an ion flux-independent signaling mode mediating synaptic long-term depression (LTD) and spine shrinkage. How these different modes of NMDAR activity are controlled remains unknown. Here, we identify AETA (Aη), an amyloid-β precursor protein (APP) cleavage product, as an NMDAR modulator with the unique dual regulatory capacity to impact both signaling modes. AETA inhibits ionotropic NMDAR activity, principally of GluN2A containing heteromers, by competing with the co-agonist and induces an intracellular conformational modification of GluN1 subunits. This favors ion flux-independent NMDAR signaling leading to enhanced LTD and spine shrinkage. Endogenously, AETA production is increased by in vivo chemogenetically-induced neuronal activity, suggesting that it can act as an activity-dependent modulator of NMDARs. Genetic deletion of the AETA production pathway alters NMDAR transmission and prevents LTD, phenotypes rescued by acute exogenous application of AETA. This genetic deletion also impairs contextual fear memory formation, a phenotype rescued upon reintroduction of AETA in the brain in vivo. Our findings reveal AETA as a unique type of endogenous modulator of NMDARs, exerting bidirectional control over their signaling and associated brain information processing.