Survival after stress requires the precise orchestration of cell-signalling events to ensure that biosynthetic processes are alerted and cell survival pathways are initiated. Here we show that Bag1, a co-chaperone for heat-shock protein 70 (Hsp70), coordinates signals for cell growth in response to cell stress, by downregulating the activity of Raf-1 kinase. Raf-1 and Hsp70 compete for binding to Bag1, such that Bag1 binds to and activates Raf-1, subsequently activating the downstream extracellular signal-related kinases (ERKs). When levels of Hsp70 are elevated after heat shock, or in cells conditionally overexpressing Hsp70, Bag1-Raf-1 is displaced by Bag1-Hsp70, and DNA synthesis is arrested. Mutants Bag1C204A and Bag1E208A, which cannot bind Hsp70, constitutively activate Raf-1/ERK kinases but are unaffected by Hsp70; consequently neither Bag1-Raf-1 nor DNA synthesis is negatively affected during heat shock. Likewise, mutants Hsp70F245S, Hsp70R262W and Hsp70L282R, which retain chaperone activity but do not bind to Bag1, fail to repress Bag1 activation of Raf-1/ERK kinase. We propose that Bag1 functions in the heat-shock response to coordinate cell growth signals and mitogenesis, and that Hsp70 functions as a sensor in stress signalling.