TAR DNA binding protein of 43 kDa (TDP-43) is a nuclear factor functioning in RNA processing. It is also a major deposited protein in amyotrophic lateral sclerosis (ALS) and frontotemporal lobar degeneration with ubiquitin (FTLD-U). To understand the mechanism underlying the inclusion body formation and possible functional alteration, we studied some TDP-43 fragments and their effects on RNA processing in cell models. The results show that the 35-kDa fragment of TDP-43 (namely TDP-35, residues 90-414), but not TDP-25A (184-414), is capable of forming cytoplasmic inclusion bodies and altering pre-mRNA splicing. The inclusions formed by TDP-35 can also recruit full-length TDP-43 to cytoplasmic deposition from functionally nuclear localization. The in vitro studies demonstrate that TDP-35, rather than TDP-43 and TDP-25A, is prone to aggregation, and it further serves as a seed to facilitate aggregation of full-length TDP-43. This suggests that fragmentation of TDP-43 leads to cellular redistribution, inclusion body formation, and altered RNA processing, which are implicated in the molecular pathogenesis of ALS and FTLD.