Abnormalities in nucleic acid processing are associated with the development of amyotrophic lateral sclerosis (ALS) and frontotemporal dementia (FTD). Mutations in Matrin 3 (MATR3), a poorly understood DNA- and RNA-binding protein, cause familial ALS/FTD, and MATR3 pathology is a feature of sporadic disease, suggesting that MATR3 dysfunction is integrally linked to ALS pathogenesis. Using a rat primary neuron model to assess MATR3-mediated toxicity, we noted that neurons were bidirectionally vulnerable to MATR3 levels, with pathogenic MATR3 mutants displaying enhanced toxicity. MATR3’s zinc finger domains partially modulated toxicity, but elimination of its RNA recognition motifs had no effect on survival, instead facilitating its self-assembly into liquid-like droplets. In contrast to other RNA-binding proteins associated with ALS, cytoplasmic MATR3 redistribution mitigated neurodegeneration, suggesting that nuclear MATR3 mediates toxicity. Our findings offer a foundation for understanding MATR3-related neurodegeneration and how nucleic acid binding functions, localization, and pathogenic mutations drive sporadic and familial disease.