The extensive links between proteotoxic stress, protein aggregation and pathologies ranging from ageing to neurodegeneration underscore the importance of understanding how cells manage protein misfolding. Using live-cell imaging, we determine the fate of stress-induced misfolded proteins from their initial appearance until their elimination. Upon denaturation, misfolded proteins are sequestered from the bulk cytoplasm into dynamic endoplasmic reticulum (ER)-associated puncta that move and coalesce into larger structures in an energy-dependent but cytoskeleton-independent manner. These puncta, which we name Q-bodies, concentrate different misfolded and stress-denatured proteins en route to degradation, but do not contain amyloid aggregates, which localize instead to the insoluble protein deposit compartment. Q-body formation and clearance depends on an intact cortical ER and a complex chaperone network that is affected by rapamycin and impaired during chronological ageing. Importantly, Q-body formation enhances cellular fitness during stress. We conclude that spatial sequestration of misfolded proteins in Q-bodies is an early quality control strategy occurring synchronously with degradation to clear the cytoplasm of potentially toxic species.