Amyotrophic lateral sclerosis (ALS) is a lethal disease characterized by motor neuron degeneration and associated with aggregation of nuclear RNA-binding proteins (RBPs), including FUS. How FUS aggregation and neurodegeneration are prevented in healthy motor neurons remain critically unanswered questions. Here, we use a combination of ALS patient autopsy tissue and induced pluripotent stem cell-derived neurons to study the effects of FUS mutations on RBP homeostasis. We show that FUS’ tendency to aggregate is normally buffered by interacting RBPs, but this buffering is lost when FUS mislocalizes to the cytoplasm due to ALS mutations. The presence of aggregation-prone FUS in the cytoplasm causes imbalances in RBP homeostasis that exacerbate neurodegeneration. However, enhancing autophagy using small molecules reduces cytoplasmic FUS, restores RBP homeostasis and rescues motor function in vivo. We conclude that disruption of RBP homeostasis plays a critical role in FUS-ALS and can be treated by stimulating autophagy.