Homeostatic control of intracellular ionic strength is essential for protein, organelle and genome function, yet mechanisms that sense and enable adaptation to ionic stress remain poorly understood in animals. We find that the transcription factor NFAT5 directly senses solution ionic strength using a C-terminal intrinsically disordered region. Both in intact cells and in a purified system, NFAT5 forms dynamic, reversible biomolecular condensates in response to increasing ionic strength. This self-associative property, conserved from insects to mammals, allows NFAT5 to accumulate in the nucleus and activate genes that restore cellular ion content. Mutations that reduce condensation or those that promote aggregation both reduce NFAT5 activity, highlighting the importance of optimally tuned associative interactions. To investigate the composition of NFAT5 condensates in response to hypertonic stress, proteins in close proximity of NFAT5 were identified using a variant of NFAT5 fused to TurboID as bait. Hypertonic stress increases NFAT5 proximity to protein complexes belonging to the GO gene sets of “transcription coactivator activity” and “positive regulation of DNA templated transcription initiation.” Closer inspection revealed that the association between NFAT5 and two transcriptional co-activators (the mediator complex and BRD4) and RNAPII itself increased in response to hypertonic stress.