A hallmark of amyotrophic lateral sclerosis (ALS), a devastating neurodegenerative disease, is formation of inclusion bodies (IBs) from misfolded proteins in neuronal cells. TAR RNA/DNA-binding protein 43 kDa (TDP43) is an ALS-causative protein forming IBs in ALS patients. The relation between localization of the IBs and neurotoxicity remains largely unknown. We characterized aggregation of fluorescently tagged TDP43 and its carboxyl-terminal fragments (CTFs) by analytical fluorescence imaging techniques. Quantitative time-lapse analysis in individual live cells showed that fluorescent-protein-tagged TDP43 was cleaved and a 35 kDa TDP43 CTF (TDP35) formed ubiquitin (Ub)-negative cytoplasmic IBs. Although TDP35 formed mildly toxic Ub-negative IBs in the cytoplasm, TDP25, another type of a TDP43 CTF, efficiently formed sufficiently toxic Ub-positive IBs. One- or two-color fluorescence correlation spectroscopy (FCS/FCCS) revealed that coaggregation of TDP25 with TDP43 was initiated by depletion of the RNA that binds to TDP25. Moreover, nuclear localization tagging TDP25 reduced the rate of neuronal cell death. These observations point to the need to elucidate the novel sequestration mechanism and details of the toxicity of the misfolded and aggregation-prone TDP43 CTFs (as well as the RNA binding and nuclear retention) in order to identify possible preventive interventions against ALS.