Carboxyl-terminal fragments (CTFs) of TDP-43 aggregate to form the diagnostic signature inclusions of frontotemporal lobar degeneration and amyotrophic lateral sclerosis, but the biological significance of these CTFs and how they are generated remain enigmatic. To address these issues, we engineered mammalian cells with an inducible tobacco etch virus (TEV) protease that cleaves TDP-43 containing a TEV cleavage site. Regions of TDP-43 flanking the second RNA recognition motif (RRM2) are efficiently cleaved by TEV, whereas sites within this domain are more resistant to cleavage. CTFs containing RRM2 generated from de novo cleavage of nuclear TDP-43 are transported to the cytoplasm and efficiently cleared, indicating that cleavage alone is not sufficient to initiate CTF aggregation. However, CTFs rapidly aggregated into stable cytoplasmic inclusions following de novo cleavage when dynein-mediated microtubule transport was disrupted, RNA was depleted, or natively misfolded CTFs were introduced into these cells. Our data support a "two-hit" mechanism of CTF aggregation dependent on TDP-43 cleavage.