It is well established that protein aggregation is associated with many neurodegenerative disorders including polyglutamine diseases, but a mechanistic understanding of the role of protein aggregates in the disease pathogenesis remains elusive. Previously thought to be the cause of cellular toxicity such as cellular dysfunction and cell death, protein aggregation is now proposed to serve a protective role by sequestering toxic oligomers from interfering with essential physiological processes. To investigate the relationship between protein aggregation and cellular toxicity, we have characterized and compared the effects of two GFP-fusion proteins that form aggregates in Saccharomyces cerevisiae, one with a polyasparagine repeat (GFP(N104)) and one without (GFP(C)). Although both proteins can form microscopically visible GFP-positive aggregates, only the GFP(N104)-containing aggregates exhibit morphological and biochemical characteristics that resemble the aggregates formed by mutant huntingtin in yeast cells. Formation of both the GFP(C) and GFP(N104) aggregates depends on microtubules, while only the GFP(N104) aggregate requires the chaperone Hsp104 and the prion Rnq1 and is resistant to SDS. Although no microscopically visible GFP(N104) aggregates were observed in the hsp104Delta and rnq1Delta mutant cells, SDS-insoluble aggregates can still be detected by the filter trap assay. These observations argue that the GFP(N104)-containing aggregates can exist in at least two distinct states in vivo. We also show that a nucleus-targeted GFP(N104) interferes with transcription from two SAGA-dependant promoters and results in a decrease in cell viability. Overall, the results imply that the GFP(N104) protein behaves similarly to the mutant huntingtin in yeast cells and provides a new model for investigating the interplay between protein aggregates and the associated phenotypes.