The AAA+-ATPase valosin-containing protein (VCP; also called p97 or Cdc48), a major protein unfolding machinery with a variety of essential functions, localizes to different subcellular compartments where it has different functions. However, the processes regulating the distribution of VCP between the cytosol and nucleus are not understood. Here, we identified p37 (also called UBXN2B) as a major factor regulating VCP nucleocytoplasmic shuttling. p37-dependent VCP localization was crucial for local cytosolic VCP functions, such as autophagy, and nuclear functions in DNA damage repair. Mutations in VCP causing multisystem proteinopathy enhanced its association with p37, leading to decreased nuclear localization of VCP, which enhanced susceptibility to DNA damage accumulation. Both VCP localization and DNA damage susceptibility in cells with such mutations were normalized by lowering p37 levels. Thus, we uncovered a mechanism by which VCP nucleocytoplasmic distribution is fine-tuned, providing a means for VCP to respond appropriately to local needs.