Human immunodeficiency virus type 1 (HIV-1)-associated dementia is observed in 20-30% of patients with acquired immunodeficiency syndrome (AIDS). The epsilon4 allele of the apolipoprotein E (APOE) gene currently is thought to play a role as a risk factor for the development of HIV dementia. The HIV protein Tat is neurotoxic and binds to the same receptor as apoE, the low-density lipoprotein receptor-related protein (LRP). In this study, we investigated the role apoE plays in Tat toxicity. Synaptosomes from wild-type mice treated with Tat had increased reactive oxygen species (ROS), increased lipid and protein oxidation, and decreased mitochondrial membrane potential. Synaptosomes from APOE-knockout mice also had increased ROS, increased protein oxidation, and decreased mitochondrial membrane potential, but to a significantly lesser degree. Treatment of synaptosomes with heparinase and Tat increased Tat-induced oxidative stress, consistent with the notion of Tat requiring interaction with neuronal membranes to induce oxidative damage. Human lipidated apoE3 greatly protected neurons from Tat-induced toxicity, whereas human lipidated apoE4 showed no protection. We demonstrated that human apoE3 has antioxidant properties against Tat-induced toxicity. Taken together, the data suggest that murine apoE and human apoE4 act similarly and do not protect the cell from Tat-induced toxicity. This would allow excess Tat to remain outside the cell and interact with synaptosomal membranes, leading to oxidative stress and neurotoxicity, which could contribute to dementia associated with HIV. We show that the antioxidant properties of apoE3 greatly outweigh the competition for clearance in deterring Tat-induced oxidative stress.