Alzheimer's disease is cytopathologically characterized by loss of synapses and neurons, neuritic amyloid plaques consisting of beta-amyloid (Abeta) peptides, and neurofibrillary tangles consisting of hyperphosphorylated tau protein in susceptible brain regions. Abeta, which triggers a cascade of pathogenic events including tau phosphorylation and neuronal excitotoxicity, is proteolytically derived from beta-amyloid precursor protein (APP); the pathological and physiological functions of APP, however, remain undefined. Here we demonstrate that the level of tau phosphorylation in cells and brains deficient in APP is significantly higher than that in wild-type controls, resulting from activation of cyclin-dependent kinase 5 (CDK5) but not glycogen synthase kinase 3, the two major tau kinases. In addition, we show that overexpression of APP or its non-amyloidogenic homolog amyloid precursor-like protein 1 suppresses both basal and stress-induced CDK5 activation. The ectodomain of APP, sAPPalpha, is responsible for inhibiting CDK5 activation. Furthermore, neurons derived from APP-deficient mice exhibit reduced metabolism and survival rates and are more susceptible to excitotoxic glutamate-induced apoptosis. These neurons also manifest significant defects in neurite outgrowth compared with neurons from the wild-type littermates. The observed neuronal excitotoxicity/apoptosis is mediated through a mechanism involving CDK5 activation. Our study defines a novel neuroprotective function for APP in preventing tau hyperphosphorylation via suppressing overactivation of CDK5. We suggest that CDK5 activation, through a calcium/calpain/p25 pathway, plays a key role in neuronal excitotoxicity and represents an underlying mechanism for the physiological functions of APP.