Biomolecular condensates formed via phase separation of proteins, and nucleic acids regulate crucial cellular processes. However, such liquid-like membraneless bodies can undergo aberrant liquid-to-solid transitions into amyloid-like pathological species, which necessitates their efficient clearance by the cellular protein quality control machinery comprising molecular chaperones. We present a unique case to demonstrate that a heat shock protein 40 (Ydj1) promotes the heterotypic phase separation of intrinsically disordered tau via a multitude of interactions. Using multicolor imaging, time-resolved fluorescence anisotropy, vibrational Raman spectroscopy, and single-molecule Förster resonance energy transfer, we unmask the crucial molecular events associated with heterotypic phase separation of tau. We show that the presence of Ydj1 within condensates abolishes phase transitions into amyloids, unlike tau-only droplets that spontaneously mature into amyloid fibrils. We identify the amyloidogenic hexapeptide motifs located in the hydrophobic microtubule-binding region of tau that interacts with the peptide-binding regions of Ydj1 promoting tau-Ydj1 condensate formation. Our results provide mechanistic underpinnings of condensate-mediated protein homeostasis.