An intronic expansion of GGGGCC repeats within the C9ORF72 gene is the most common genetic cause of amyotrophic lateral sclerosis and frontotemporal dementia (ALS‐FTD). Ataxin‐2 with intermediate length of polyglutamine expansions (Ataxin‐2 Q30x) is a genetic modifier of the disease. Here, we found that C9ORF72 forms a complex with the WDR41 and SMCR8 proteins to act as a GDP/GTP exchange factor for RAB8a and RAB39b and to thereby control autophagic flux. Depletion of C9orf72 in neurons partly impairs autophagy and leads to accumulation of aggregates of TDP‐43 and P62 proteins, which are histopathological hallmarks of ALS‐FTD. SMCR8 is phosphorylated by TBK1 and depletion of TBK1 can be rescued by phosphomimetic mutants of SMCR8 or by constitutively active RAB39b, suggesting that TBK1, SMCR8, C9ORF72, and RAB39b belong to a common pathway regulating autophagy. While depletion of C9ORF72 only has a partial deleterious effect on neuron survival, it synergizes with Ataxin‐2 Q30x toxicity to induce motor neuron dysfunction and neuronal cell death. These results indicate that partial loss of function of C9ORF72 is not deleterious by itself but synergizes with Ataxin‐2 toxicity, suggesting a double‐hit pathological mechanism in ALS‐FTD.