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The toxic effects of C9orf72-derived arginine-rich dipeptide repeats (R-DPRs) on cellular stress granules in amyotrophic lateral sclerosis (ALS) and frontotemporal dementia remain unclear at the molecular level. Stress granules are formed through the switch of Ras GTPase-activating protein-binding protein 1 (G3BP1) by RNA from a closed inactive state to an open activated state, driving the formation of the organelle by liquid-liquid phase separation (LLPS). We show that R-DPRs bind G3BP1 a thousand times stronger than RNA and initiate LLPS much more effectively. Their pathogenic effect is underscored by the slow transition of R-DPR-G3BP1 droplets to aggregated, ThS-positive states that can recruit ALS-linked proteins hnRNPA1, hnRNPA2, and TDP-43. Deletion constructs and molecular simulations show that R-DPR binding and LLPS are mediated via the negatively charged intrinsically disordered region 1 (IDR1) of the protein, allosterically regulated by its positively charged IDR3. Bioinformatic analyses point to the strong mechanistic parallels of these effects with the interaction of R-DPRs with nucleolar nucleophosmin 1 (NPM1) and underscore that R-DPRs interact with many other similar nucleolar and stress-granule proteins, extending the underlying mechanism of R-DPR toxicity in cells. Our results also highlight characteristic differences between the two R-DPRs, poly-GR and poly-PR, and suggest that the primary pathological target of poly-GR is not NPM1 in nucleoli, but G3BP1 in stress granules in affected cells. [ABSTRACT FROM AUTHOR]