Updated project metadata. Endoplasmic reticulum (ER)-associated degradation (ERAD) and ER-phagy are two principal degradative mechanisms in the ER; however, the crosstalk between these two pathways and its physiological significance remain unexplored. Here we report that SEL1L-HRD1 ERAD limits autophagy and that, when ERAD is impaired, the ER becomes fragmented containing misfolded ER proteins or aggregates, which are subsequently cleared by autophagy. When both are compromised, ER fragments containing misfolded proteins spatially coalesce into a distinct architecture termed Coalescence of ER Fragments (CERFs), consisted of lipoprotein lipase (LPL) and ER chaperones such as BiP. CERFs enlarge and become increasingly insoluble with age. Finally, we reconstitute the CERFs through LPL and BiP phase separation in vitro, a process controlled by both redox environment and C-terminal tryptophan loop of LPL. Hence, our findings demonstrate a profound cellular adaptation capability and plasticity, centered around SEL1L-HRD1 ERAD, in dealing with misfolded proteins or protein aggregates in the ER.