Accumulation and aggregation of TDP-43 is a major pathological hallmark of amyotrophic lateral sclerosis and frontotemporal dementia. TDP-43 inclusions also characterize patients with GGGGCC (G4C2) hexanucleotide repeat expansion in C9orf72 that causes the most common genetic form of amyotrophic lateral sclerosis and frontotemporal dementia (C9ALS/FTD). Functional studies in cell and animal models have identified pathogenic mechanisms including repeat-induced RNA toxicity and accumulation of G4C2-derived dipeptide-repeat proteins. The role of TDP-43 dysfunction in C9ALS/FTD, however, remains elusive. We found G4C2-derived dipeptide-repeat protein but not G4C2-RNA accumulation caused TDP-43 proteinopathy that triggered onset and progression of disease in Drosophila models of C9ALS/FTD. Timing and extent of TDP-43 dysfunction was dependent on levels and identity of dipeptide-repeat proteins produced, with poly-GR causing early and poly-GA/poly-GP causing late onset of disease. Accumulating cytosolic, but not insoluble aggregated TDP-43 caused karyopherin-α2/4 (KPNA2/4) pathology, increased levels of dipeptide-repeat proteins and enhanced G4C2-related toxicity. Comparable KPNA4 pathology was observed in both sporadic frontotemporal dementia and C9ALS/FTD patient brains characterized by its nuclear depletion and cytosolic accumulation, irrespective of TDP-43 or dipeptide-repeat protein aggregates. These findings identify a vicious feedback cycle for dipeptide-repeat protein-mediated TDP-43 and subsequent KPNA pathology, which becomes self-sufficient of the initiating trigger and causes C9-related neurodegeneration.