Cabeza (caz) is the single Drosophila melanogaster orthologue of the human FET proteins FUS, TAF15, and EWSR1, which have been implicated in amyotrophic lateral sclerosis (ALS) and frontotemporal dementia. In this study, we identified Xrp1, a nuclear chromatin-binding protein, as a key modifier of caz mutant phenotypes. Xrp1 expression was strongly up-regulated in caz mutants, and Xrp1 heterozygosity rescued their motor defects and life span. Interestingly, selective neuronal Xrp1 knockdown was sufficient to rescue, and neuronal Xrp1 overexpression phenocopied caz mutant phenotypes. The caz/Xrp1 genetic interaction depended on the functionality of the AT-hook DNA-binding domain in Xrp1, and the majority of Xrp1-interacting proteins are involved in gene expression regulation. Consistently, caz mutants displayed gene expression dysregulation, which was mitigated by Xrp1 heterozygosity. Finally, Xrp1 knockdown substantially rescued the motor deficits and life span of flies expressing ALS mutant FUS in motor neurons, implicating gene expression dysregulation in ALS-FUS pathogenesis.