Paraspeckles are subnuclear structures formed around nuclear paraspeckle assembly transcript 1 (NEAT1)/MENε/β long noncoding RNA (lncRNA). Here we show that paraspeckles become dramatically enlarged after proteasome inhibition. This enlargement is mainly caused by NEAT1 transcriptional up-regulation rather than accumulation of undegraded paraspeckle proteins. Of interest, however, using immuno-electron microscopy, we find that key paraspeckle proteins become effectively depleted from the nucleoplasm by 50% when paraspeckle assembly is enhanced, suggesting a sequestration mechanism. We also perform microarrays from NEAT1-knockdown cells and find that NEAT1 represses transcription of several genes, including the RNA-specific adenosine deaminase B2 (ADARB2) gene. In contrast, the NEAT1-binding paraspeckle protein splicing factor proline/glutamine-rich (SFPQ) is required for ADARB2 transcription. This leads us to hypothesize that ADARB2 expression is controlled by NEAT1-dependent sequestration of SFPQ. Accordingly, we find that ADARB2 expression is strongly reduced upon enhanced SFPQ sequestration by proteasome inhibition, with concomitant reduction in SFPQ binding to the ADARB2 promoter. Finally, NEAT1(-/-) fibroblasts are more sensitive to proteasome inhibition, which triggers cell death, suggesting that paraspeckles/NEAT1 attenuates the cell death pathway. These data further confirm that paraspeckles are stress-responsive nuclear bodies and provide a model in which induced NEAT1 controls target gene transcription by protein sequestration into paraspeckles.