Caspase cleavage of amyloid precursor protein (APP) has been reported to be important in amyloid beta protein (Aβ)-mediated neurotoxicity. However, the underlying mechanisms are not clearly understood. In this study, we explored the effect of caspase cleavage of APP on tau phosphorylation in relation to Aβ. We found that Asp664 cleavage of APP increased tau phosphorylation at Thr212 and Ser262 in N2A cells and primary cultured hippocampal neurons. Compared with wild-type APP, protein phosphatase 2A (PP2A) activity was significantly increased when Asp664 cleavage was blocked by the D664A point mutation. Furthermore, we found that over-expression of C31 reduced PP2A activity. C31 binds directly to the PP2A catalytic subunit, through the asparagine, proline, threonine, tyrosine (NPTY) motif, which is essential for C31-induced tau hyperphosphorylation. However, it appears that the other fragment produced by Asp664 cleavage, Jcasp, modulates neither PP2A activity nor tau hyperphosphorylation. Asp664 cleavage and accompanying tau hyperphosphorylation were remarkably diminished by blockage of Aβ production using a γ-secretase inhibitor. Taken together, our results suggest that Asp664 cleavage of APP leads to tau hyperphosphorylation at specific epitopes by modulating PP2A activity as a downstream of Aβ. Direct binding of C31 to PP2A through the C31-NPTY domain was identified as a mechanism underlying this effect.