The aggregation, cellular mislocalization and dysfunction of TDP-43 are hallmarks of multiple neurodegenerative disorders. We find that inducing TDP-43 aggregation through prion-like seeding gradually diminishes normal TDP-43 nuclear localization and function. Aggregate-affected cells show signature features of TDP-43 loss of function, such as DNA damage and dysregulated TDP-43-target expression. We also observe strong activation of TDP-43-controlled cryptic exons in cells, including human neurons treated with proteopathic seeds. Furthermore, aggregate seeding impairs TDP-43 autoregulation, an essential mechanism controlling TDP-43 homeostasis. Interestingly, proteins that normally interact with TDP-43 are not recruited to aggregates, while other factors linked to TDP-43 pathology, including Ataxin 2, specifically colocalize to inclusions and modify seeding-induced aggregation. Our findings indicate that TDP-43 aggregation, mislocalization and loss of function are strongly linked and suggest that disruption of TDP-43 autoregulation establishes a toxic feed-forward mechanism that amplifies aggregation and may be central in mediating this pathological connection.