It has long been assumed that the oxidized form of glutathione, the tripeptide glutamate-cysteine-glycine, is a source of oxidizing equivalents needed for the formation of disulphide bonds in proteins within the endoplasmic reticulum (ER), although the in vivo function of glutathione in the ER has never been studied directly. Here we show that the major pathway for oxidation in the yeast ER, defined by the protein Ero1, is responsible for the oxidation of both glutathione and protein thiols. However, mutation and overexpression studies show that glutathione competes with protein thiols for the oxidizing machinery. Thus, contrary to expectation, cellular glutathione contributes net reducing equivalents to the ER; these reducing equivalents can buffer the ER against transient hyperoxidizing conditions.