Misfolded or unfolded proteins in the ER are said to be degraded only after translocation or isolation from the ER. Here, we describe a mechanism by which mutant proteins are degraded within the ER. Aggregates of mutant arginine vasopressin (AVP) precursor were confined to ER-associated compartments (ERACs) connected to the ER in AVP neurons of a mouse model of familial neurohypophysial diabetes insipidus. The ERACs were enclosed by membranes, an ER chaperone and marker protein of phagophores and autophagosomes were expressed around the aggregates, and lysosomes fused with the ERACs. Moreover, lysosome-related molecules were present within the ERACs, and aggregate degradation within the ERACs was dependent on autophagic-lysosomal activity. Thus, we demonstrate that protein aggregates can be degraded by autophagic-lysosomal machinery within specialized compartments of the ER.