TAR DNA-binding protein 43 (TDP-43) pathology and C9orf72 hexanucleotide repeat expansions are two major pathological features of amyotrophic lateral sclerosis and frontotemporal dementia (ALS/FTD). Growing evidence indicates that dipeptide repeat proteins produced from C9orf72 repeats, particularly glycine–arginine (poly(GR)), promote TDP-43 aggregation, but the underlying mechanism remains unclear. Here we show that poly(GR) enhances liquid–liquid phase separation (LLPS) of TDP-43 and induces phase demixing within the resulting condensates. Demixed condensates contain regions with high local TDP-43 concentration that progressively solidify and undergo conformational changes from dynamic assemblies into oligomeric and fibrillar species rich in β-sheet structure, which promote the formation of toxic TDP-43 aggregates in cellular assays. Together, these findings support a mechanism in which phase separation enables poly(GR) to promote pathological TDP-43 aggregation and highlight condensate demixing and conformational conversion, constituting a key pathway for TDP-43 aggregation and a potential target for therapeutic intervention.