Accumulation of misfolded secretory proteins in the endoplasmic reticulum (ER) activates the unfolded protein response (UPR) stress pathway. To enhance secretory protein folding and promote adaptation to stress, the UPR upregulates ER chaperone levels, including BiP. Here we describe chromosomal tagging of KAR2, the yeast homologue of BiP, with superfolder green fluorescent protein (sfGFP) to create a multifunctional endogenous reporter of the ER folding environment. Changes in Kar2p-sfGFP fluorescence levels directly correlate with UPR activity and represent a robust reporter for high-throughput analysis. A novel second feature of this reporter is that photobleaching microscopy (fluorescence recovery after photobleaching) of Kar2p-sfGFP mobility reports on the levels of unfolded secretory proteins in individual cells, independent of UPR status. Kar2p-sfGFP mobility decreases upon treatment with tunicamycin or dithiothreitol, consistent with increased levels of unfolded proteins and the incorporation of Kar2p-sfGFP into slower-diffusing complexes. During adaptation, we observe a significant lag between down-regulation of the UPR and resolution of the unfolded protein burden. Finally, we find that Kar2p-sfGFP mobility significantly increases upon inositol withdrawal, which also activates the UPR, apparently independent of unfolded protein levels. Thus Kar2p mobility represents a powerful new tool capable of distinguishing between the different mechanisms leading to UPR activation in living cells.