Ataxin-3, the disease protein in Machado-Joseph disease, is known to be proteolytically modified by various enzymes including two major families of proteases, caspases and calpains. This processing results in the generation of toxic fragments of the polyglutamine-expanded protein. Although various approaches were undertaken to identify cleavage sites within ataxin-3 and to evaluate the impact of fragments on the molecular pathogenesis of Machado-Joseph disease, calpain-mediated cleavage of the disease protein and the localization of cleavage sites remained unclear. Here, we report on the first precise localization of calpain cleavage sites in ataxin-3 and on the characterization of the resulting breakdown products. After confirming the occurrence of calpain-derived fragmentation of ataxin-3 in patient-derived cell lines and post-mortem brain tissue, we combined in silico prediction tools, western blot analysis, mass spectrometry, and peptide overlay assays to identify calpain cleavage sites. We found that ataxin-3 is primarily cleaved at two sites, namely at amino acid positions D208 and S256 and mutating amino acids at both cleavage sites to tryptophan nearly abolished ataxin-3 fragmentation. Furthermore, analysis of calpain cleavage-derived fragments showed distinct aggregation propensities and toxicities of C-terminal polyglutamine-containing breakdown products. Our data elucidate the important role of ataxin-3 proteolysis in the pathogenesis of Machado-Joseph disease and further emphasize the relevance of targeting this disease pathway as a treatment strategy in neurodegenerative disorders.