Microtubule-associated protein tau is abnormally hyperphosphorylated in the brain of patients with Alzheimer disease and in this form is the major protein subunit of the paired helical filaments (PHF), the most prominent lesion of the disease. In this study the dephosphorylation of sparingly soluble PHF, PHF II-tau by brain protein phosphatase (PP)-2A1 and PP-2B, and the resulting biochemical, biological, and structural alterations were investigated. Both of the phosphatases dephosphorylated PHF II-tau at the sites of Ser-199/Ser-202 and partially dephosphorylated it at Ser-396/Ser-404; in addition, PHF II-tau was dephosphorylated at Ser-46 by PP-2A1 and Ser-235 by PP-2B. The relative electrophoretic mobility of PHF II-tau increased after dephosphorylation by either enzyme. Divalent cations, manganese, and magnesium increased the activities of PP-2A1 and PP-2B toward PHF II-tau. Dephosphorylation both by PP-2B and PP-2A1 decreased the resistance of PHF II-tau to proteolysis by the brain calcium-activated neutral proteases (CANP). The ability of PHF II-tau to promote the in vitro microtubule assembly was restored after dephosphorylation by PP-2A1 and PP-2B. Microtubules assembled by the dephosphorylated PHF II-tau were structurally identical to those assembled by bovine tau used as a control. The dephosphorylation both by PP-2A1 and PP-2B caused dissociation of the tangles and the PHF; some of the PHF dissociated into straight protofilaments/subfilaments. Approximately 25% of the total tau was released from PHF on dephosphorylation by PP-2A1. These observations demonstrate that PHF II-tau is accessible to dephosphorylation by PP-2A1 and PP-2B, and dephosphorylation makes PHF dissociate, accessible to proteolysis by CANP, and biologically active in promoting the assembly of tubulin into microtubules.