APOE4 is the strongest genetic risk factor for late-onset Alzheimer disease. ApoE4 increases brain amyloid-β pathology relative to other ApoE isoforms. However, whether APOE independently influences tau pathology, the other major proteinopathy of Alzheimer disease and other tauopathies, or tau-mediated neurodegeneration, is not clear. By generating P301S tau transgenic mice on either a human ApoE knock-in (KI) or ApoE knockout (KO) background, here we show that P301S/E4 mice have significantly higher tau levels in the brain and a greater extent of somatodendritic tau redistribution by three months of age compared with P301S/E2, P301S/E3, and P301S/EKO mice. By nine months of age, P301S mice with different ApoE genotypes display distinct phosphorylated tau protein (p-tau) staining patterns. P301S/E4 mice develop markedly more brain atrophy and neuroinflammation than P301S/E2 and P301S/E3 mice, whereas P301S/EKO mice are largely protected from these changes. In vitro, E4-expressing microglia exhibit higher innate immune reactivity after lipopolysaccharide treatment. Co-culturing P301S tau-expressing neurons with E4-expressing mixed glia results in a significantly higher level of tumour-necrosis factor-α (TNF-α) secretion and markedly reduced neuronal viability compared with neuron/E2 and neuron/E3 co-cultures. Neurons co-cultured with EKO glia showed the greatest viability with the lowest level of secreted TNF-α. Treatment of P301S neurons with recombinant ApoE (E2, E3, E4) also leads to some neuronal damage and death compared with the absence of ApoE, with ApoE4 exacerbating the effect. In individuals with a sporadic primary tauopathy, the presence of an ε4 allele is associated with more severe regional neurodegeneration. In individuals who are positive for amyloid-β pathology with symptomatic Alzheimer disease who usually have tau pathology, ε4-carriers demonstrate greater rates of disease progression. Our results demonstrate that ApoE affects tau pathogenesis, neuroinflammation, and tau-mediated neurodegeneration independently of amyloid-β pathology. ApoE4 exerts a ‘toxic’ gain of function whereas the absence of ApoE is protective.