Alzheimer's disease (AD) is characterized by the progressive spread of tau pathology throughout the brain. Inflammation has been demonstrated to be present in the disease state as well as changes in endocytic trafficking. Here we identify the Rab7 effector RILP, a protein at the intersection of inflammatory states and endocytic trafficking, as a novel player in tau propagation. We show that RILP is cleaved in AD brain and this cleavage correlates to increases in hyperphosphorylated tau. Cleavage can be induced in both BE(2) neuron-like cells as well as a microglia cell line when they are treated with the inflammatory mediators lipopolysaccharide (LPS) and ATP. This inflammatory state also enhances tau propagation between BE(2) cells, an effect that is mitigated by overexpressing a noncleavable RILP. Furthermore, microglial cells contribute to intercellular tau propagation through both the release of inflammation-associated factors and the direct uptake and secretion of tau, potentially via extracellular vesicles (EVs). In HMC3 microglial cells, RILP cleavage led to impaired tau degradation, increasing intracellular tau accumulation. Additionally, the RILP cleavage status influences EV secretion in microglia. These findings suggest that RILP cleavage alters the endocytic trafficking of tau causing increased cell-cell propagation in a cell-culture model of AD.