As a key player of the protein quality control network of the cell, the molecular chaperone Hsp70 inhibits the aggregation of the amyloid protein tau. To date, the mechanism of this inhibition and the tau species targeted by Hsp70 remain unknown. This is partly due to the inherent difficulty of studying amyloid aggregates because of their heterogeneous and transient nature. Here, we used ensemble and single-molecule fluorescence measurements to dissect how Hsp70 counteracts the self-assembly process of the K18 ΔK280 tau variant. We found that Hsp70 blocks the early stages of tau aggregation by suppressing the formation of tau nuclei. Additionally, Hsp70 sequesters oligomers and mature tau fibrils with nanomolar affinity into a protective complex, efficiently neutralizing their ability to damage membranes and seed further tau aggregation. Our results provide novel insights into the molecular mechanisms by which the chaperone Hsp70 counteracts the formation, propagation, and toxicity of tau aggregates.