Alzheimer's disease most closely correlates with the appearance of the neurofibrillary tangles (NFTs), intracellular fibrous aggregates of the microtubule-associated protein, tau. Under native conditions, tau is an unstructured protein, and its physical characterization has revealed no clues about the three-dimensional structural determinants essential for aggregation or microtubule binding. We have found that the natural osmolyte trimethylamine N-oxide (TMAO) induces secondary structure in a C-terminal fragment of tau (tau(187)) and greatly promotes both self-aggregation and microtubule (MT) assembly activity. These processes could be distinguished, however, by a single-amino acid substitution (Tyr(310) --> Ala), which severely inhibited aggregation but had no effect on MT assembly activity. The inability of this mutant to aggregate could be completely reversed by TMAO. We propose a model in which TMAO induces partial order in tau(187), resulting in conformers that may correspond to on-pathway intermediates of either aggregation or tau-dependent MT assembly or both. These studies set the stage for future high-resolution structural characterization of these intermediates and the basis by which Tyr(310) may direct pathologic versus normal tau function.