Human immunodeficiency virus type 1 (HIV-1) demonstrates a high degree of viral diversity which has an impact on viral fitness. Genetic compartmentalization of HIV-1 proteins between central nervous system (CNS) and lymphoid tissues is well established and reflects altered requirements for HIV-1 replication in macrophages/microglia, brain-specific immune selection pressures and possibly the timing of virus invasion of the CNS. Tat-encoding mRNA has been detected in the CNS of HIV-1 infected individuals and its neurotoxic effects in the CNS are well documented. However, while CNS-derived tat sequences have demonstrated significant diversity, the effect of this molecular diversity on transcriptional regulation and its impact on the pathogenesis of HIV-associated dementia (HAD) remains unclear. In this study, we cloned and characterised 44 unique tat alleles from brain, cerebral spinal fluid, spinal cord and blood/lymphoid tissue-derived HIV-1 isolates from five subjects with HAD. While phylogenetic analyses revealed tissue-specific compartmentalization of Tat variants for two patients, broad compartmentalization across the panel of tissue-derived viruses was not observed. Despite the lack of consistent tissue-specific compartmentalization, sequence variations within patients segregated CNS and non-CNS tat alleles. These amino acid alterations predominated within the transactivation domain of Tat and could account for alterations in the ability of particular Tat proteins to transactivate the LTR. Although a subset of patients demonstrated reduced transactivation capacity among CNS-derived Tat proteins compared to those from matched lymphoid tissues, overall Tat proteins from the CNS to lymphoid compartments maintained similar levels of transactivation function. Together, these data suggest that despite the observed heterogeneity in tat alleles isolated from matched lymphoid to CNS compartments, Tat function is maintained, highlighting the importance of Tat function in HIV-1 neuropathogenesis.