Multiple human diseases are associated with a liquid-to-solid phase transition resulting in the formation of amyloid fibers or protein aggregates. Here, we present an alternative mechanism for cellular toxicity based on a concentration-dependent liquid-liquid demixing. Analyzing proteins that are toxic when their concentration is increased in yeast reveals that they share physicochemical properties with proteins that participate in physiological liquid-liquid demixing in the cell. Increasing the concentration of one of these proteins indeed results in the formation of cytoplasmic foci with liquid properties. Demixing occurs at the onset of toxicity and titrates proteins and mRNAs from the cytoplasm. Focus formation is reversible, and resumption of growth occurs as the foci dissolve as protein concentration falls. Preventing demixing abolishes the dosage sensitivity of the protein. We propose that triggering inappropriate liquid phase separation may be an important cause of dosage sensitivity and a determinant of human disease.