We describe the design, synthesis, X-ray studies, and biological evaluation of novel BACE1 inhibitors containing bicyclic isoxazoline carboxamides as the P3 ligand in combination with methyl cysteine, methylsulfonylalanine and Boc-amino alanine as P2 ligands. Inhibitor 3a displayed a BACE1 Ki value of 10.9 nM and EC50 of 343 nM. The X-ray structure of 3a bound to the active site of BACE1 was determined at 2.85 A resolution. The structure revealed that the major molecular interactions between BACE1 and the bicyclic tetrahydrofuranyl isoxazoline heterocycle are van der Waals in nature.