INTRODUCTION: Microglia have been implicated in the templated spread of tau aggregates in tauopathies through mouse studies. However, it is unclear whether these findings translate to human disease. METHODS: We challenged human induced pluripotent stem cell (iPSC)-derived microglia-like-cells (iMGL) with monomeric and fibrillar recombinant tau and tau purified from Alzheimer's patient brains, examining in detail the uptake, processing, release, and seeding of tau by microglia. RESULTS: iMGL take up tau via lipoprotein receptor-related protein 1 (LRP)1 and heparan sulfate proteoglycans, with leucine-rich repeat kinase 2 affecting LRP1 trafficking. Monomeric tau is digested effectively with minimal effects on iMGL, but recombinant or brain-derived tau fibrils induce chemokine/interferon response subtypes, alongside downregulation of homeostatic genes. Fibrillar tau is degradation-resistant, can escape into the cytoplasm, and becomes phosphorylated on two specific residues. iMGL release partially digested fibrillar tau, including in extracellular vesicles, visualized by cryo-electron microscopy, that seed aggregation in neurons. DISCUSSION: Our study reveals new insights into human microglial responses to tau, highlighting opportunities to limit pathogenic tau spread.