Amyotrophic lateral sclerosis (ALS) and frontotemporal lobar degeneration (FTLD) are two incurable neurodegenerative disorders that exist on a symptomological spectrum and share both genetic underpinnings and pathophysiological hallmarks. Functional abnormality of TAR DNA-binding protein 43 (TDP-43), an aggregation-prone RNA and DNA binding protein, is observed in the vast majority of both familial and sporadic ALS cases and in ~40% of FTLD cases, but the cascade of events leading to cell death are not understood. We have expressed human TDP-43 (hTDP-43) in Drosophila neurons and glia, a model that recapitulates many of the characteristics of TDP-43-linked human disease including protein aggregation pathology, locomotor impairment, and premature death. We report that such expression of hTDP-43 impairs small interfering RNA (siRNA) silencing, which is the major post-transcriptional mechanism of retrotransposable element (RTE) control in somatic tissue. This is accompanied by de-repression of a panel of both LINE and LTR families of RTEs, with somewhat different elements being active in response to hTDP-43 expression in glia versus neurons. hTDP-43 expression in glia causes an early and severe loss of control of a specific RTE, the endogenous retrovirus (ERV) gypsy. We demonstrate that gypsy causes the degenerative phenotypes in these flies because we are able to rescue the toxicity of glial hTDP-43 either by genetically blocking expression of this RTE or by pharmacologically inhibiting RTE reverse transcriptase activity. Moreover, we provide evidence that activation of DNA damage-mediated programmed cell death underlies both neuronal and glial hTDP-43 toxicity, consistent with RTE-mediated effects in both cell types. Our findings suggest a novel mechanism in which RTE activity contributes to neurodegeneration in TDP-43-mediated diseases such as ALS and FTLD.