Liquid-liquid phase separation (LLPS) is an emerging phenomenon in cell physiology and diseases. The weak multivalent interaction prerequisite for LLPS is believed to be facilitated through intrinsically disordered regions, which are prevalent in neurodegenerative disease-associated proteins. These aggregation-prone proteins also exhibit an inherent property for phase separation, resulting in protein-rich liquid-like droplets. The very high local protein concentration in the water-deficient confined microenvironment not only drives the viscoelastic transition from the liquid to solid-like state but also most often nucleate amyloid fibril formation. Indeed, protein misfolding, oligomerization, and amyloid aggregation are observed to be initiated from the LLPS of various neurodegeneration-related proteins. Moreover, in these cases, neurodegeneration-promoting genetic and environmental factors play a direct role in amyloid aggregation preceded by the phase separation. These cumulative recent observations ignite the possibility of LLPS being a prominent nucleation mechanism associated with aberrant protein aggregation. The present review elaborates on the nucleation mechanism of the amyloid aggregation pathway and the possible early molecular events associated with amyloid-related protein phase separation. It also summarizes the recent advancement in understanding the aberrant phase transition of major proteins contributing to neurodegeneration focusing on the common disease-associated factors. Overall, this review proposes a generic LLPS-mediated multistep nucleation mechanism for amyloid aggregation and its implication in neurodegeneration.