Moses Mendelssohn never gave up being an observant and religious Jew. He lived and worked in Berlin, where Jews could live only with explicit permission, and where Jews emphatically did not have equal rights with Christians. He received the admiration of Christian philosophers and writers of his time, which was an extraordinary accomplishment.
Mendelssohn's writings encouraged Jews to take a much broader look at themselves and their religious beliefs. Somehow, therefore, Mendelssohn is held responsible for a philosophy that led other Jews to adopt a much more secular life. I think he gets a lot of blame for things he wasn't responsible for. Prejudice and outright discrimination against Jews continued in Germany after his death, so Jews who listened to him often converted to Christianity to escape bigotry and to be allowed to pursue intellectual jobs. Two famous converts of the following generation: his own son, who became the father of composer Felix Mendelssohn, and the poet and writer Heinrich Heine. There were many others. It seems to me that the way that German Jews coped with a difficult situation in the 19th century is no fault of Mendelssohn, but historians vary in the way they handle this.
Another development that took place after Mendelssohn's death was Reform Judaism. I am unsure about the exact progression of influence from his thought to the thought of the reformers. I'm also not convinced at all that Jewish efforts to assimilate into German life, where they were demonstrably unwelcome despite many success stories, was a plausible cause of the Holocaust. When I say it that way, it seems preposterous that anyone accuses Mendelssohn and other Jews of causing violent antisemitic behavior in subsequent centuries, but some people have indeed made that argument.