Human immunodeficiency virus-associated neurological disorders (HANDs) affect the majority of AIDS patients and are a significant problem among HIV-1-infected individuals who live longer because of combined anti-retroviral therapies. HIV-1 utilizes a number of viral proteins and subsequent cytokine inductions to unleash its toxicity on neurons. Among HIV-1 viral proteins, Nef is a small protein expressed abundantly in astrocytes of HIV-1-infected brains and has been suggested to have a role in the pathogenesis of HAND. In order to explore its effect in the central nervous system, HIV-1 Nef was expressed in primary human fetal astrocytes (PHFAs) using an adenovirus. Our results revealed that HIV-1 Nef is released in extracellular vesicles (EVs) derived from PHFA cells expressing the protein. Interestingly, HIV-1 Nef release in EVs was enriched significantly when the cells were treated with autophagy activators perifosine, tomaxifen, MG-132, and autophagy inhibitors LY294002 and wortmannin suggesting a novel role of autophagy signaling in HIV-1 Nef release from astrocytes. Next, Nef-carrying EVs were purified from astrocyte cultures and neurotoxic effects on neurons were analyzed. We observed that HIV-1 Nef-containing EVs were readily taken up by neurons as demonstrated by immunocytochemistry and immunoblotting. Furthermore, treatment of neurons with Nef-carrying EVs induced oxidative stress as evidenced by a decrease in glutathione levels. To further investigate its neurotoxic effects, we expressed HIV-1 Nef in primary neurons by adenoviral transduction. Intracellular expression of HIV-1 Nef caused axonal and neurite degeneration of neurons. Furthermore, expression of HIV-1 Nef decreased the levels of phospho-tau while enhancing total tau in primary neurons. In addition, treatment of primary neurons with Nef-carrying EVs suppressed functional neuronal action potential assessed by multielectrode array studies. Collectively, these data suggested that HIV-1 Nef can be a formidable contributor to neurotoxicity along with other factors, which leads to HAND in HIV-1-infected AIDS patients.