TDP-43 (also known as TARDBP) regulates different processes of gene expression, including transcription and splicing, through RNA and DNA binding. Moreover, recent reports have shown that the protein interacts with the 3′UTRs of specific mRNAs. The aberrant cellular distribution and aggregation of TDP-43 were recently reported in neurodegenerative diseases, namely frontotemporal lobar degeneration (FTLD) and amyotrophic lateral sclerosis (ALS). A detailed description of the determinants for cellular localization has yet to emerge, including information on how the known functions of TDP-43 and cellular targeting affect each other. We provide the first experimental evidence that TDP-43 continuously shuttles between nucleus and cytoplasm in a transcription-dependent manner. Furthermore, we investigate the role of the functional TDP-43 domains in determining cellular targeting through a combination of immunofluorescence and biochemical fractionation methods. Our analyses indicate that the C-terminus is essential for solubility and cellular localization, because its deletion results in the formation of large nuclear and cytoplasmic aggregates. Disruption of the RNA-recognition domain required for RNA and DNA binding, however, alters nuclear distribution by decreasing TDP-43 presence in the nucleoplasm. Our findings suggest that TDP-43 solubility and localization are particularly sensitive to disruptions that extend beyond the newly found nuclear localization signal and depend on a combination of factors that are closely connected to the functional properties of this protein.