Molecular diversity within brain-derived HIV-1 sequences is highly variable depending on the individual gene examined and the neurological status of the patient. Herein, we examined different brain-derived human immunodeficiency virus (HIV)-1 tat sequences in terms of their effects on LTR transactivation and host gene induction in neural cells. Astrocytic and monocytoid cells co-transfected with prototypic tat clones derived from non-demented (ND) (n = 3) and demented (HAD) (n = 3) AIDS patients and different HIV-LTR constructs revealed that LTR transactivation mediated by tat clones derived from HAD patients was decreased (p < 0.05). A Tat-derived peptide containing the amino acid 24-38 domain from a ND clone caused down-regulation of the LTR transactivation (p < 0.05) in contrast to peptides from other Tat regions derived from HAD and ND tat clones. Both brain-derived HAD and ND tat constructs were able to induce the host immune genes, MCP-1 and IL-1beta. Microarray analysis revealed several host genes were selectively upregulated by a HAD-derived tat clone including an enzyme mediating heparan sulphate synthesis, HS3ST3B1 (p < 0.05), which was also found to be increased in the brains of patients with HAD. Expression of the pro-apoptotic gene, PDCD7, was reduced in cells transfected with the HAD-derived tat clone and moreover, this gene was also suppressed in monocytoid cells infected with a neurotropic HIV-1 strain. Thus, mutations within the HIV-1 tat gene may exert pathogenic effects contributing to the development of HAD, which are independent of its effects on LTR transactivation.