TDP-43 proteinopathy is a pathological hallmark of amyotrophic lateral sclerosis and frontotemporal dementia where cytoplasmic TDP-43 inclusions are observed within degenerating regions of patient postmortem tissue. The mechanism by which TDP-43 aggregates has remained elusive due to technological limitations, which prevent the analysis of specific TDP-43 interactions in live cells. We present an optogenetic approach to reliably induce TDP-43 proteinopathy under spatiotemporal control. We show that the formation of pathologically relevant inclusions is driven by aberrant interactions between low-complexity domains of TDP-43 that are antagonized by RNA binding. Although stress granules are hypothesized to be a conduit for seeding TDP-43 proteinopathy, we demonstrate pathological inclusions outside these RNA-rich structures. Furthermore, we show that aberrant phase transitions of cytoplasmic TDP-43 are neurotoxic and that treatment with oligonucleotides composed of TDP-43 target sequences prevent inclusions and rescue neurotoxicity. Collectively, these studies provide insight into the mechanisms that underlie TDP-43 proteinopathy and present a potential avenue for therapeutic intervention.