Protein conformational diseases are associated with the aberrant accumulation of amyloid protein aggregates, but whether amyloid formation is cytotoxic or protective is unclear. To address this issue, we investigated a normally benign amyloid formed by the yeast prion RNQ⁺. Surprisingly, modest overexpression of Rnq1 protein was deadly, but only when preexisting Rnq1 was in the RNQ⁺ prion conformation. Molecular chaperones protect against protein aggregation diseases and are generally believed to do so by solubilizing their substrates. The Hsp40 chaperone, Sis1, suppressed Rnq1 proteotoxicity, but instead of blocking Rnq1 protein aggregation, it stimulated conversion of soluble Rnq1 to RNQ⁺ amyloid. Furthermore, interference with Sis1-mediated RNQ⁺ amyloid formation exacerbated Rnq1 toxicity. These and other data establish that even subtle changes in the folding homeostasis of an amyloidogenic protein can create a severe proteotoxic gain-of-function phenotype and that chaperone-mediated amyloid assembly can be cytoprotective. The possible relevance of these findings to other phenomena, including prion-driven neurodegenerative diseases and heterokaryon incompatibility in fungi, is discussed.