With the aging population increasing worldwide, neurodegenerative diseases are becoming a major public health crisis. TAR DNA-binding protein 43 (TDP-43) is one of the major components in the inclusion bodies containing aggregated proteins in affected patients with several types of neurodegenerative diseases, including amyotrophic lateral sclerosis (ALS), frontotemporal lobar degeneration (FTLD) and Alzheimer’s disease (AD). A large number of mutations in TDP-43 have been identified in familial cases of ALS. TDP-43 is an essential RNA/DNA binding protein critical for RNA-related metabolism, it shuttles between nucleus and cytoplasm, and undergoes phase transition to induce cytoplasmic and nucleoplasmic inclusion formation. Here, we summarized the recent advances in our understanding of protein aggregation and phase transition of TDP-43 in vitro and in vivo. Understanding the aberrant transition of TDP-43 will help identify potential therapeutic targets for neurodegenerative diseases.