In amyotrophic lateral sclerosis (ALS) and frontotemporal degeneration (FTD), cytoplasmic aggregates of hyperphosphorylated TDP-43 accumulate and colocalize with some stress granule components, but how pathological TDP-43 aggregation is nucleated remains unknown. In Drosophila, we establish that downregulation of tankyrase, a poly(ADP-ribose) (PAR) polymerase, reduces TDP-43 accumulation in the cytoplasm and potently mitigates neurodegeneration. We establish that TDP-43 non-covalently binds to PAR via PAR-binding motifs embedded within its nuclear localization sequence. PAR binding promotes liquid-liquid phase separation of TDP-43 in vitro and is required for TDP-43 accumulation in stress granules in mammalian cells and neurons. Stress granule localization initially protects TDP-43 from disease-associated phosphorylation, but upon long-term stress, stress granules resolve, leaving behind aggregates of phosphorylated TDP-43. Finally, small-molecule inhibition of Tankyrase-1/2 in mammalian cells inhibits formation of cytoplasmic TDP-43 foci without affecting stress granule assembly. Thus, Tankyrase inhibition antagonizes TDP-43-associated pathology and neurodegeneration and could have therapeutic utility for ALS and FTD.