The homeodomain protein TGIF functions as a negative modulator for multiple classes of transcription factors. Loss of function mutations in a single copy of TGIF result in holoprosencephaly, a developmental anomaly leading to severe forebrain and craniofacial malformations. However, the mechanisms by which these mutations disrupt the functions of TGIF remain to be elucidated. Here we show that a holoprosencephaly mutation (P63R) interferes with the ability of TGIF to act as a corepressor for c-Jun and Smad2, suggesting that this holoprosencephaly mutation may lead to a general defect in the TGIF protein. In fact, we observed that the P63R mutation affects folding of the TGIF protein, resulting in the disruption of the diffuse nuclear staining pattern characteristic of wild-type (WT) TGIF and the accumulation of TGIF in nuclear aggregates. We also show that the mutant TGIF.P63R is degraded more rapidly when compared with WT TGIF and that this degradation occurs through the ubiquitin-proteasome pathway. Furthermore, we observed that TGIF.P63R homodimerizes with WT TGIF to sequester it into nuclear aggregates and to enhance its ubiquitin-dependent degradation. These results reveal an important mechanism for the degradation of TGIF through the ubiquitin-proteasome pathway, whose deregulation might contribute to the development of human holoprosencephaly.