Neurofibrillary tangles (NFT) are a hallmark of Alzheimer's disease. The major neurofibrillary tangle component is tau that is truncated at Asp421 (Deltatau), hyperphosphorylated and aggregates into insoluble paired helical filaments. Alzheimer's disease brains also exhibit signs of inflammation manifested by activated astrocytes and microglia, which produce cytotoxic agents among them prostaglandins. We show that prostaglandin (PG) J2, an endogenous product of inflammation, induces caspase-mediated cleavage of tau, generating Deltatau, an aggregation prone form known to seed tau aggregation prior to neurofibrillary tangle formation. The initial event observed upon PGJ2-treatment of human neuroblastoma SK-N-SH cells was the build-up of ubiquitinated (Ub) proteins indicating an early disruption of the ubiquitin-proteasome pathway. Apoptosis kicked in later, manifested by caspase activation and caspase-mediated cleavage of tau at Asp421 and poly (ADP-ribose) polymerase. Furthermore, cathepsin inhibition stabilized Deltatau suggesting its lysosomal clearance. Upon PGJ2-treatment tau accumulated in a large perinuclear aggregate. In rat E18 cortical neuronal cultures PGJ2-treatment also generated Deltatau detected in dystrophic neurites. Levels of Deltatau were diminished by caspase 3 knockdown using siRNA. PGD2, the precursor of PGJ2, produced some Deltatau. PGE2 generated none. Our data suggest a potential sequence of events triggered by the neurotoxic product of inflammation PGJ2 leading to tau pathology. The accumulation of Ub proteins is an early response. If cells fail to overcome the toxic effects induced by PGJ2, including accumulation of Ub proteins, apoptosis kicks in triggering caspase activation and tau cleavage, the clearance of which by cathepsins could be compromised culminating in tau pathology. Our studies are the first to provide a mechanistic link between inflammation and tau pathology.