The Hsp110 proteins, exclusively found in the eukaryotic cytosol, have significant sequence homology to the Hsp70 molecular chaperone superfamily. Despite this homology and the cellular abundance of these proteins, the precise functional role has remained undefined. Here, we present the intriguing finding that the yeast homologue, Sse1p, acts as an efficient nucleotide exchange factor (NEF) for both yeast cytosolic Hsp70s, Ssa1p and Ssb1p. The mechanism involves formation of a stable nucleotide-sensitive complex, but does not require ATP hydrolysis by Sse1p. The NEF activity of Sse1p stimulates in vitro Ssa1p-mediated refolding of thermally denatured luciferase, and appears to have an essential role in vivo. Overexpression of the only other described cytosolic NEF, Fes1p, can partially compensate for a lethal sse1,2Delta phenotype, however, the cells are sensitive to stress conditions. Furthermore, in the absence of Sse, the in vivo refolding of thermally denatured model proteins is affected. This is the first report of a nucleotide exchange activity for the Hsp110 class of proteins, and provides a key piece in the puzzle of the cellular chaperone network.