The nuclear RNA-binding protein TDP43 is integrally involved in the pathogenesis of amyotrophic lateral sclerosis (ALS) and frontotemporal lobar degeneration (FTLD). Previous studies uncovered N-terminal TDP43 isoforms that are predominantly cytosolic in localization, highly prone to aggregation, and enriched in susceptible spinal motor neurons. In healthy cells, however, these shortened (s)TDP43 isoforms are difficult to detect in comparison to full-length (fl)TDP43, raising questions regarding their origin and selective regulation. Here, we show that sTDP43 is created as a byproduct of TDP43 autoregulation and cleared by nonsense mediated RNA decay (NMD). The sTDP43-encoding transcripts that escape NMD can lead to toxicity but are rapidly degraded post-translationally. Circumventing these regulatory mechanisms by overexpressing sTDP43 results in neurodegeneration in vitro and in vivo via N-terminal oligomerization and impairment of flTDP43 splicing activity, in addition to RNA binding-dependent gain-of-function toxicity. Collectively, these studies highlight endogenous mechanisms that tightly regulate sTDP43 expression and provide insight into the consequences of aberrant sTDP43 accumulation in disease.