Novel agents that target the proteasome, a proteolytic complex responsible for the degradation of ubiquitinated proteins, have demonstrated remarkable therapeutic efficacy in multiple myeloma, a plasma cell malignancy. However, the mechanism by which these compounds act remains unknown. A signaling pathway called the unfolded protein response (UPR) allows cells to handle the proper folding of proteins. The transcription factor XBP-1, a regulator of the UPR, is also required for plasma cell differentiation, suggesting a link between the UPR and plasma cell differentiation. Here we show that proteasome inhibitors target XBP-1 and the UPR in myeloma cells. Proteasome inhibitors suppress the activity of the translumenal endoplasmic reticulum endoribonuclease/kinase, IRE1α, to impair the generation of the active, spliced XBP-1 species and simultaneously stabilize the unspliced species that acts as a dominant negative. Myeloma cells rendered functionally deficient in XBP-1 undergo increased apoptosis in response to endoplasmic reticulum stress. Identification of compounds that target the activity of IRE1α/XBP-1 may yield novel therapies for the treatment of multiple myeloma and other malignancies that rely on an intact UPR.