Abstract Background Alzheimer’s disease (AD), the most common form of dementia, is a progressive neurodegenerative disorder that mainly affects older adults. One of the pathological hallmarks of AD is abnormally aggregated Tau protein that forms fibrillar deposits in the brain. In AD, Tau pathology correlates strongly with clinical symptoms, cognitive dysfunction, and neuronal death. Methods We aimed to develop novel therapeutic D-amino acid peptides as Tau fibrillization inhibitors. It has been previously demonstrated that D-amino acid peptides are protease stable and less immunogenic than L-peptides, and these characteristics may render them suitable for in vivo applications. Using a phage display procedure against wild type full-length Tau (Tau^FL), we selected a novel Tau binding L-peptide and synthesized its D-amino acid version ISAD1 and its retro inversed form, ISAD1rev, respectively. Results While ISAD1rev inhibited Tau aggregation only moderately, ISAD1 bound to Tau in the aggregation-prone PHF6 region and inhibited fibrillization of Tau^FL, disease-associated mutant full-length Tau (Tau^FLΔK, Tau^FL-A152T, Tau^FL-P301L), and pro-aggregant repeat domain Tau mutant (Tau^RDΔK). ISAD1 and ISAD1rev induced the formation of large high molecular weight Tau^FL and Tau^RDΔK oligomers that lack proper Thioflavin-positive β-sheet conformation even at lower concentrations. In silico modeling of ISAD1 Tau interaction at the PHF6 site revealed a binding mode similar to those known for other PHF6 binding peptides. Cell culture experiments demonstrated that ISAD1 and its inverse form are taken up by N2a-Tau^RDΔK cells efficiently and prevent cytotoxicity of externally added Tau fibrils as well as of internally expressed Tau^RDΔK. Conclusions ISAD1 and related peptides may be suitable for therapy development of AD by promoting off-pathway assembly of Tau, thus preventing its toxicity.