The unfolded protein response (UPR) is an evolutionarily conserved mechanism to allow cells to adapt to stress targeting the endoplasmic reticulum (ER). Induction of ER chaperone GRP78/BiP increases protein folding capacity; as such it represents a major survival arm of UPR. Considering the central importance of the UPR in regulating cell survival and death, evidence is emerging that cells evolve feedback regulatory pathways to modulate the key UPR executors, however, the precise mechanisms remain to be elucidated. Here, we report the fortuitous discovery of GRP78va, a novel isoform of GRP78 generated by alternative splicing (retention of intron 1) and alternative translation initiation. Bioinformatic and biochemical analyses revealed that expression of GRP78va is enhanced by ER stress and is notably elevated in human leukemic cells and leukemia patients. In contrast to the canonical GRP78 which is primarily an ER lumenal protein, GRP78va is devoid of the ER signaling peptide and is cytosolic. Through specific knockdown of endogenous GRP78va by siRNA without affecting canonical GRP78, we showed that GRP78va promotes cell survival under ER stress. We further demonstrated that GRP78va has the ability to regulate PERK signaling and that GRP78va is able to interact with and antagonize PERK inhibitor P58(IPK). Our study describes the discovery of GRP78va, a novel cytosolic isoform of GRP78/BiP, and the first characterization of the modulation of UPR signaling via alternative splicing of nuclear pre-mRNA. Our study further reveals a novel survival mechanism in leukemic cells and other cell types where GRP78va is expressed.