AGO/miRNA-mediated gene silencing and ubiquitin-mediated protein quality control represent two fundamental mechanisms that control proper gene expression. Here, we unexpectedly discover that fly and human AGO proteins, which are key components in the miRNA pathway, undergo lipid-mediated phase separation and condense into RNP granules on the endoplasmic reticulum (ER) membrane to control protein production. Phase separation on the ER is mediated by electrostatic interactions between a conserved lipid-binding motif within the AGOs and the lipid PI(4,5)P. The ER-localized AGO condensates recruit the E3 ubiquitin ligase Ltn1 to catalyze nascent-peptide ubiquitination and coordinate with the VCP-Ufd1-Npl4 complex to process unwanted protein products for proteasomal degradation. Collectively, our study provides insight into the understanding of post-transcription-translation coupling controlled by AGOs via lipid-mediated phase separation.