Tauopathies are a class of neurodegenerative diseases characterized by the progressive misfolding and accumulation of pathological tau protein in focal regions of the brain, leading to insidious neurodegeneration. Abnormalities in cholesterol metabolism and homeostasis have also been implicated in various neurodegenerative diseases. However, the connection between cholesterol dysregulation and tau pathology remains largely unknown. To model and measure the impact of cholesterol dysregulation on tau, we utilized a combination of in vitro and ex vivo tau aggregation assays using an engineered tau biosensor cell line and human induced pluripotent stem cell (iPSC)-derived neuronal cultures from an individual harboring an autosomal dominant P301L tau mutation and from a healthy control. We demonstrate that excess cholesterol esters lead to an increased rate of tau aggregation in vitro and an increase in seed-dependent insoluble tau aggregates detected in the biosensor line. We observed a strong correlation between cholesterol ester concentration and the presence of high-molecular-weight, oligomeric tau species. Importantly, in tauopathy patient iPSC-derived neurons harboring a P301L tau mutation with endogenous forms of misfolded tau, we show that acute dysregulation of cholesterol homeostasis through acute exposure to human plasma-purified cholesterol esters formed by the linkage of fatty acids to the hydroxyl group of cholesterol leads to the rapid accumulation of phosphorylated tau. Conversely, treatment with the same cholesterol esters pool did not lead to subsequent accumulation of phosphorylated tau in control iPSC-derived neurons. Finally, treatment with a heterobifunctional, small-molecule degrader designed to selectively engage and catalyze the ubiquitination and proteasomal degradation of aberrant tau species prevented cholesterol ester-induced aggregation of tau in the biosensor cell line in a Cereblon E3 ligase-dependent manner. Degrader treatment also restored the resiliency of tauopathy patient-derived neurons towards cholesterol ester-induced tau aggregation phenotypes. Taken together, our study supports a key role of cholesterol dysregulation in tau aggregation. Moreover, it provides further pre-clinical validation of the therapeutic strategy of targeted protein degradation with heterobifunctional tau degraders for blocking tau seeding.