The accumulation of mutant protein in intracellular aggregates is a common feature of neurodegenerative disease. In Huntington disease, mutant huntingtin leads to inclusion body (IB) formation and neuronal toxicity. Impairment of the ubiquitin-proteasome system (UPS) has been implicated in IB formation and Huntington disease pathogenesis. However, IBs form asynchronously in only a subset of cells with mutant huntingtin, and the relationship between IB formation and UPS function has been difficult to elucidate. Here, we applied single-cell longitudinal acquisition and analysis to monitor mutant huntingtin IB formation, UPS function, and neuronal toxicity. We found that proteasome inhibition is toxic to striatal neurons in a dose-dependent fashion. Before IB formation, the UPS is more impaired in neurons that go on to form IBs than in those that do not. After forming IBs, impairment is lower in neurons with IBs than in those without. These findings suggest IBs are a protective cellular response to mutant protein mediated in part by improving intracellular protein degradation.