In Alzheimer's disease (AD), tau undergoes numerous modifications, including increased phosphorylation at serine-422 (pS422). In the human brain, pS422 tau protein is found in prodromal AD, correlates well with cognitive decline and neuropil thread pathology, and appears associated with increased oligomer formation and exposure of the N-terminal phosphatase-activating domain (PAD). However, whether S422 phosphorylation contributes to toxic mechanisms associated with disease-related forms of tau remains unknown. Here, we report that S422-pseudophosphorylated tau (S422E) lengthens the nucleation phase of aggregation without altering the extent of aggregation or the types of aggregates formed. When compared to unmodified tau aggregates, the S422E modification significantly increased the amount of SDS-stable tau dimers, despite similar levels of immunoreactivity with an oligomer-selective antibody (TOC1) and another antibody that reports PAD exposure (TNT1). Vesicle motility assays in isolated squid axoplasm further revealed that S422E tau monomers inhibited anterograde, kinesin-1 dependent fast axonal transport (FAT). Unexpectedly, and unlike unmodified tau aggregates, which selectively inhibit anterograde FAT, aggregates composed of S422E tau were found to inhibit both anterograde and retrograde FAT. Highlighting the relevance of these findings to human disease, pS422 tau was found to colocalize with tau oligomers and with a fraction of tau showing increased PAD exposure in the human AD brain. This study identifies novel effects of pS422 on tau biochemical properties, including prolonged nucleation and enhanced dimer formation, which correlate with a distinct inhibitory effect on FAT. Taken together, these findings identify a novel mechanistic basis by which pS422 confers upon tau a toxic effect that may directly contribute to axonal dysfunction in AD and other tauopathies.