The phosphorylation state of tau changes during neurodevelopment and highly phosphorylated tau accumulates in the paired helical filaments found in Alzheimer's disease. In non-neuronal mammalian cells transiently expressed tau is predominantly not phosphorylated at sites known to be phosphorylated in paired helical filaments. However this pattern of phosphorylation is induced by both glycogen synthase kinase-3 alpha and -3 beta and here we show that this results in a change in the intracellular properties of tau. Within cells tau is bound to cytoskeletal structures and causes changes in cellular cytoarchitecture with the induction of thick and stable microtubule bundles. This morphology is lost when tau is co-expressed with glycogen synthase kinase-3 beta; microtubules become less stable and are not bound by tau. Independently of any direct or indirect effects on tau, glycogen synthase kinase-3 beta induces some but relatively slight changes in microtubule organization with the loss of a prominent centrosomal microtubular origin. The cytoskeleton is critical to cell function and within post-mitotic neurons has a highly specialized structure induced, in part, by the neuronal-specific microtubule-associated proteins such as tau. In vitro studies have suggested that the properties of tau are regulated by phosphorylation as highly phosphorylated tau does not promote tubulin polymer assembly. We have demonstrated, in intact cells, that tau highly phosphorylated in the presence of glycogen synthase kinase-3 beta loses the properties of microtubule binding and stabilization, suggesting that regulation of tau phosphorylation by this enzyme might be an important mechanism whereby cytoskeletal function is modulated during neurodevelopment and lost in neurodegeneration.