We investigate here quantum effects in gravitational collapse of a scalar field model which classically leads to a naked singularity. We show that nonperturbative semiclassical modifications near the singularity, based on loop quantum gravity, give rise to a strong outward flux of energy. This leads to the dissolution of the collapsing cloud before the singularity can form. Quantum gravitational effects thus censor naked singularities by avoiding their formation. Further, quantum gravity induced mass flux has a distinct feature which may lead to a novel observable signature in astrophysical bursts.