The activity of Hsp70 proteins is regulated by accessory proteins, which include members of the DnaJ-like protein family. Characterized by the presence of a highly conserved 70-amino acid J domain, DnaJ homologues activate the ATPase activity of Hsp70 proteins and stabilize their interaction with unfolded substrates. DnaJ homologues have been identified in most organelles where they are involved in nearly all aspects of protein synthesis and folding. Within the endoplasmic reticulum (ER), DnaJ homologues have also been shown to assist in the translocation, secretion, retro-translocation, and ER-associated degradation (ERAD) of secretory pathway proteins. By using bioinformatic methods, we identified a novel mammalian DnaJ homologue, ERdj4. It is the first ER-localized type II DnaJ homologue to be reported. The signal sequence of ERdj4 remains uncleaved and serves as a membrane anchor, orienting its J domain into the ER lumen. ERdj4 co-localized with GRP94 in the ER and associated with BiP in vivo when they were co-expressed in COS-1 cells. In vitro experiments demonstrated that the J domain of ERdj4 stimulated the ATPase activity of BiP in a concentration-dependent manner. However, mutation of the hallmark tripeptide HPD (His --> Gln) in the J domain totally abolished this activation. ERdj4 mRNA expression was detected in all human tissues examined but showed the highest level of the expression in the liver, kidney, and placenta. We found that ERdj4 was highly induced at both the mRNA and protein level in response to ER stress, indicating that this protein might be involved in either protein folding or ER-associated degradation.