Apolipoprotein (apo) E4, a 299-aa protein and a major risk factor for Alzheimer's disease, can be cleaved to generate C-terminal-truncated fragments that cause neurotoxicity in vitro and neurodegeneration and behavioral deficits in transgenic mice. To investigate this neurotoxicity, we expressed apoE4 with C- or N-terminal truncations or mutations in transfected Neuro-2a cells. ApoE4 (1-272) was neurotoxic, but full-length apoE4(1-299) and apoE4(1-240) were not, suggesting that the lipid-binding region (amino acids 241-272) mediates the neurotoxicity and that amino acids 273-299 are protective. A quadruple mutation in the lipid-binding region (I250A, F257A, W264R, and V269A) abolished the neurotoxicity of apoE4(1-272), and single mutations in the region of amino acids 273-299 (L279Q, K282A, or Q284A) made full-length apoE4 neurotoxic. Immunofluorescence staining showed that apoE4(1-272) formed filamentous inclusions containing phosphorylated tau in some cells and interacted with mitochondria in others, leading to mitochondrial dysfunction as determined by MitoTracker staining and flow cytometry. ApoE4(241-272) did not cause mitochondrial dysfunction or neurotoxicity, suggesting that the lipid-binding region alone is insufficient for neurotoxicity. Truncation of N-terminal sequences (amino acids 1-170) containing the receptor-binding region (amino acids 135-150) and triple mutations within that region (R142A, K146A, and R147A) abolished the mitochondrial interaction and neurotoxicity of apoE4(1-272). Further analysis showed that the receptor-binding region is required for escape from the secretory pathway and that the lipid-binding region mediates mitochondrial interaction. Thus, the lipid- and receptor-binding regions in apoE4 fragments act together to cause mitochondrial dysfunction and neurotoxicity, which may be important in Alzheimer's disease pathogenesis.