Amyotrophic Lateral Sclerosis (ALS) is a rare neurodegenerative disease characterized by motor neuron dysfunction and loss, leading to progressive paralysis and death. A portion of ALS cases is caused by mutation of the proteasome shuttle factor Ubiquilin 2 (UBQLN2), but the molecular pathway leading from UBQLN2 dysfunction to neurodegenerative disease remains unclear. Here, we demonstrate a major function of UBQLN2 in regulating activity of the domesticated gag-pol retrotransposon ‘paternally expressed gene 10’ (PEG10) in human cells and tissues. UBQLN2 exclusively facilitates degradation of the frameshifted gag-pol form of PEG10 through recognition of a unique polyproline repeat. In cells, the PEG10 gag-pol protein cleaves itself in a mechanism reminiscent of retrotransposon self-processing to generate a liberated ‘nucleocapsid’ fragment, which uniquely localizes to the nucleus. Overexpression of the nucleocapsid fragment upregulates transcription of neuronal genes involved in axon remodeling, which were also affected in sporadic ALS (sALS) patient tissues. Finally, proteomics of spinal cords from ALS patients revealed that PEG10 gag-pol is significantly elevated in disease compared to healthy controls. These findings implicate the retrotransposon-like activity of PEG10 as a contributing mechanism in ALS through regulation of neuronal gene expression, and restraint of PEG10 as a primary function of UBQLN2.