Apolipoprotein (apo) E4 increases the risk and accelerates the onset of Alzheimer's disease (AD). However, the underlying mechanisms remain to be determined. We previously found that apoE undergoes proteolytic cleavage in AD brains and in cultured neuronal cells, resulting in the accumulation of carboxyl-terminal-truncated fragments of apoE that are neurotoxic. Here we show that this fragmentation is caused by proteolysis of apoE by a chymotrypsin-like serine protease that cleaves apoE4 more efficiently than apoE3. Transgenic mice expressing the carboxyl-terminal-cleaved product, apoE4(Delta272-299), at high levels in the brain died at 2-4 months of age. The cortex and hippocampus of these mice displayed AD-like neurodegenerative alterations, including abnormally phosphorylated tau (p-tau) and Gallyas silver-positive neurons that contained cytosolic straight filaments with diameters of 15-20 nm, resembling preneurofibrillary tangles. Transgenic mice expressing lower levels of the truncated apoE4 survived longer but showed impaired learning and memory at 6-7 months of age. Thus, carboxyl-terminal-truncated fragments of apoE4, which occur in AD brains, are sufficient to elicit AD-like neurodegeneration and behavioral deficits in vivo. Inhibiting their formation might inhibit apoE4-associated neuronal deficits.