A hexanucleotide repeat expansion in the C9orf72 gene is the most common genetic cause of amyotrophic lateral sclerosis (ALS) and frontotemporal dementia (FTD). How this mutation leads to these neurodegenerative diseases remains unclear. Here, we show using patient stem cell–derived motor neurons that the repeat expansion impairs microtubule-based transport, a process critical for neuronal survival. Cargo transport defects are recapitulated by treating neurons from healthy individuals with proline-arginine and glycine-arginine dipeptide repeats (DPRs) produced from the repeat expansion. Both arginine-rich DPRs similarly inhibit axonal trafficking in adult Drosophila neurons in vivo. Physical interaction studies demonstrate that arginine-rich DPRs associate with motor complexes and the unstructured tubulin tails of microtubules. Single-molecule imaging reveals that microtubule-bound arginine-rich DPRs directly impede translocation of purified dynein and kinesin-1 motor complexes. Collectively, our study implicates inhibitory interactions of arginine-rich DPRs with axonal transport machinery in C9orf72-associated ALS/FTD and thereby points to potential therapeutic strategies.