Protein phosphatase-2A (PP2A) activity, which is compromised in Alzheimer disease brain, is regulated by two endogenous inhibitors, one of them being I(2)(PP2A), a 277 amino acid long protein also known as SET. Here we report that both the amino terminal fragment (I(2NTF); aa 1-175) and the carboxy terminal fragment (I(2CTF); aa 176-277) of I(2)(PP2A) inhibit PP2A by binding to its catalytic subunit PP2Ac and cause hyperphosphorylation of tau. The C-terminal acidic region in I(2CTF) and Val 92 in I(2NTF) are essential for their association with PP2Ac and inhibition of the phosphatase activity.