Tau acetylation has recently emerged as a dominant post-translational modification (PTM) in Alzheimer's disease (AD) and related tauopathies. Mass spectrometry studies indicate that tau acetylation sites cluster within the microtubule (MT)-binding region (MTBR), suggesting acetylation could regulate both normal and pathological tau functions. Here, we combined biochemical and cell-based approaches to uncover a dual pathogenic mechanism mediated by tau acetylation. We show that acetylation specifically at residues K280/K281 impairs tau-mediated MT stabilization, and enhances the formation of fibrillar tau aggregates, highlighting both loss and gain of tau function. Full-length acetylation-mimic tau showed increased propensity to undergo seed-dependent aggregation, revealing a potential role for tau acetylation in the propagation of tau pathology. We also demonstrate that methylene blue, a reported tau aggregation inhibitor, modulates tau acetylation, a novel mechanism of action for this class of compounds. Our study identifies a potential "two-hit" mechanism in which tau acetylation disengages tau from MTs and also promotes tau aggregation. Thus, therapeutic approaches to limit tau K280/K281 acetylation could simultaneously restore MT stability and ameliorate tau pathology in AD and related tauopathies.