Human apolipoprotein (apo) E4, a major risk factor for Alzheimer's disease (AD), occurs in amyloid plaques and neurofibrillary tangles (NFTs) in AD brains; however, its role in the pathogenesis of these lesions is unclear. Here we demonstrate that carboxyl-terminal-truncated forms of apoE, which occur in AD brains and cultured neurons, induce intracellular NFT-like inclusions in neurons. These cytosolic inclusions were composed of phosphorylated tau, phosphorylated neurofilaments of high molecular weight, and truncated apoE. Truncated apoE4, especially apoE4(Delta 272--299), induced inclusions in up to 75% of transfected neuronal cells, but not in transfected nonneuronal cells. ApoE4 was more susceptible to truncation than apoE3 and resulted in much greater intracellular inclusion formation. These results suggest that apoE4 preferentially undergoes intracellular processing, creating a bioactive fragment that interacts with cytoskeletal components and induces NFT-like inclusions containing phosphorylated tau and phosphorylated neurofilaments of high molecular weight in neurons.