Tau is a microtubule-associated protein, found at high levels in neurons, and its aggregation is associated with neurodegeneration. Recently, it was found that tau can be actively secreted from neurons, but the effects of extracellular tau on neuronal viability are unclear. In this study, we investigated whether extracellular tau2N4R can cause neurotoxicity in primary cultures of rat brain neurons and glial cells. Cell cultures were examined for neuronal loss, death, and phosphatidylserine exposure, as well as for microglial phagocytosis by fluorescence microscopy. Aggregation of tau2N4R was assessed by atomic force microscopy. We found that extracellular addition of tau induced a gradual loss of neurons over 1-2 days, without neuronal necrosis or apoptosis, but accompanied by proliferation of microglia in the neuronal-glial co-cultures. Tau addition caused exposure of the 'eat-me' signal phosphatidylserine on the surface of living neurons, and this was prevented by elimination of the microglia or by inhibition of neutral sphingomyelinase. Tau also increased the phagocytic activity of pure microglia, and this was blocked by inhibitors of neutral sphingomyelinase or protein kinase C. The neuronal loss induced by tau was prevented by inhibitors of neutral sphingomyelinase, protein kinase C or the phagocytic receptor MerTK, or by eliminating microglia from the cultures. The data suggest that extracellular tau induces primary phagocytosis of stressed neurons by activated microglia, and identifies multiple ways in which the neuronal loss induced by tau can be prevented.