Unfolded proteins and other conditions affecting endoplasmic reticulum (ER) homeostasis cause ER stress. The cell reacts to ER stress by activation of the unfolded protein response (UPR), which induces profound changes in cellular metabolism including general translation attenuation, transcriptional upregulation of molecular chaperone genes, and activation of ER-associated degradation. However, prolonged or acute ER stress results in cell death. Recent progress suggests that ER stress and UPR play key roles in the immune response, diabetes, tumor growth under hypoxic conditions, and in some neurodegenerative diseases. Further research on ER stress and UPR will greatly enhance the understanding of these physiological and pathological processes, and provide novel avenues to potential therapies.