The apolipoprotein E ε4 allele is the single most important genetic risk factor associated with Alzheimer's disease (AD). Tau phosphorylation and hyperphosphorylation is an underlying feature of AD and is regulated by specific kinases and phosphatases. Among phosphatases, protein phosphatase 2A (PP2A) is the principal tau dephosphorylating enzyme in the brain. Several abnormalities of PP2A have been reported in AD, including among others decreased protein levels of PP2A, decreased mRNA and protein levels of the catalytic subunit PP2AC and variable regulatory B subunits and reduced methylation of the catalytic subunit, all of which results in disruption of the PP2A phosphatase activity. In earlier studies we described a novel mechanism for ApoE as a transcription factor that binds regions of double-stranded DNA with high affinity, including the promoter regions of ˜ 3000 different genes. The list of genes also included PPP2R5E (B56ε), a regulatory B′ subunit of protein phosphatase 2A. Using a combination of A172 human glioblastoma cells, ApoE3/4 and ApoE−/− NSC and human postmortem tissue, we now demonstrate that ApoE not only binds to the PPP2R5E promoter but also triggers a significant reduction in PP2A activity by two mechanisms: 1) ApoE transcriptionally represses PPP2R5E and reduces protein expression, and 2) ApoE triggers demethylation of the catalytic subunit (PP2AC) of PP2A, resulting in the disruption of the PPP2R5E-PP2AC complex. Our results indicated a significant down-regulation of PPP2R5E gene expression and reduction in PP2A activity by ApoE4 compared with ApoE3. This may also explain an elevated Tau phosphorylation in AD human brains that featured at least one ApoE4 allele. Thus, our present work links ApoE and PPP2R5E expression to a reduction in the PP2A catalytic activity that has implications for Alzheimer's disease.