Unfolded proteins in the endoplasmic reticulum cause trans-autophosphorylation of the bifunctional transmembrane kinase Ire1, which induces its endoribonuclease activity. The endoribonuclease initiates nonconventional splicing of HAC1 messenger RNA to trigger the unfolded-protein response (UPR). We explored the role of Ire1's kinase domain by sensitizing it through site-directed mutagenesis to the ATP-competitive inhibitor 1NM-PP1. Paradoxically, rather than being inhibited by 1NM-PP1, drug-sensitized Ire1 mutants required 1NM-PP1 as a cofactor for activation. In the presence of 1NM-PP1, drug-sensitized Ire1 bypassed mutations that inactivate its kinase activity and induced a full UPR. Thus, rather than through phosphorylation per se, a conformational change in the kinase domain triggered by occupancy of the active site with a ligand leads to activation of all known downstream functions.