Ero1 catalyzes disulfide bond formation as proteins fold within the endoplasmic reticulum (ER), which generates high levels of peroxide that can cause oxidative stress unless the reactive peroxide species are degraded by peroxidases. As yeast cells do not contain identified ER-localized peroxidases, it was not clear how these cells adapt to peroxide during protein folding. To solve this conundrum, Wang et al. searched for ER proteins with redox-responsive amino acids that might be used to sense ER peroxide, identifying the yeast homolog of the chaperone BiP (Kar2) with a single conserved cysteine residue in the ATPase domain. Strains expressing Kar2 with an alanine substituted for this cysteine maintained normal Kar2 activity under nonstress conditions but were highly sensitive to oxidative stress. Using a biotin-switch assay, the authors found that, during stress, peroxide oxidized the Kar2 cysteine to form sulfenic acid. Substitution of the cysteine with a negatively charged or bulky amino acid to mimic cysteine oxidation resulted in protection against oxidative stress. Finally, the authors found that Ero1-mediated oxidation of Kar2 enhanced chaperone holdase activity but prevented ATPase activity, suggesting a decoupling between ATPase and peptide-binding chaperone functions upon Kar2 modification. Overall, these data support a model in which redox regulation of Kar2 activity prevents protein aggregation under stressful conditions.