Misfolded proteins are usually refolded to their functional conformations or degraded by quality control mechanisms. When misfolded proteins evade quality control, they can be sequestered to specific sites within cells to prevent the potential dysfunction and toxicity that arises from protein aggregation. Btn2 and Hsp42 are compartment-specific sequestrases that play key roles in the assembly of these deposition sites. Their exact intracellular functions and substrates are not well defined, particularly since heat stress sensitivity is not observed in deletion mutants. We show here that Btn2 and Hsp42 are required for tolerance to oxidative stress conditions induced by exposure to hydrogen peroxide. Btn2 and Hsp42 act to sequester oxidized proteins into defined PQC sites following ROS exposure and their absence leads to an accumulation of protein aggregates. The toxicity of protein aggregate accumulation causes oxidant sensitivity in btn2 hsp42 sequestrase mutants since overexpression of the Hsp104 disaggregase rescues oxidant tolerance. We have identified the Sup35 translation termination factor as an in vivo sequestrase substrate and show that Btn2 and Hsp42 act to suppress oxidant-induced formation of the yeast [PSI+] prion, which is the amyloid form of Sup35. [PSI+] prion formation in sequestrase mutants does not require IPOD (insoluble protein deposit) localization which is the site where amyloids are thought to undergo fragmentation and seeding to propagate their heritable prion form. Instead, both amorphous and amyloid Sup35 aggregates are increased in btn2 hsp42 mutants consistent with the idea that prion formation occurs at multiple intracellular sites during oxidative stress conditions in the absence of sequestrase activity. Taken together, our data identify protein sequestration as a key antioxidant defence mechanism that functions to mitigate the damaging consequences of protein oxidation-induced aggregation.