Neurite deficits and synaptic dysfunction contribute to cognitive impairments in Alzheimer's disease (AD). However, the underlying molecular mechanisms remain unclear. Here, we show that γ-adducin, a cytoskeleton-associated protein that assembles the spectrin-actin framework, is cleaved by a lysosomal cysteine proteinase named asparagine endopeptidase (AEP). AEP is upregulated and activated during aging and cleaves γ-adducin at N357, disrupting spectrin-actin assembly. Moreover, γ-adducin (1-357) fragment downregulates the expression of Rac2, leading to defects in neurite outgrowth. Expression of the γ-adducin (1-357) fragment in the hippocampus of tau P301S transgenic mice resulted in significant AD-like pathology and cognitive deficits. In summary, AEP-mediated fragmentation of γ-adducin plays a vital role in AD. Blocking the activity of AEP might be a novel therapeutic target for AD.