P58(IPK) is an Hsp40 family member known to inhibit the interferon (IFN)-induced, double-stranded RNA-activated, eukaryotic initiation factor 2alpha (eIF2alpha) protein kinase R (PKR) by binding to its kinase domain. We find that the stress of unfolded proteins in the endoplasmic reticulum (ER) activates P58(IPK) gene transcription through an ER stress-response element in its promoter region. P58(IPK) interacts with and inhibits the PKR-like ER-localized eIF2alpha kinase PERK, which is normally activated during the ER-stress response to protect cells from ER stress by attenuating protein synthesis and reducing ER client protein load. Levels of phosphorylated eIF2alpha were lower in ER-stressed P58(IPK)-overexpressing cells and were enhanced in P58(IPK) mutant cells. In the ER-stress response, PKR-like ER kinase (PERK)-mediated translational repression is transient and is followed by translational recovery and enhanced expression of genes that increase the capacity of the ER to process client proteins. The absence of P58(IPK) resulted in increased expression levels of two ER stress-inducible genes, BiP and Chop, consistent with the enhanced eIF2alpha phosphorylation in the P58(IPK) deletion cells. Our studies suggest that P58(IPK) induction during the ER-stress response represses PERK activity and plays a functional role in the expression of downstream markers of PERK activity in the later phase of the ER-stress response.