Ire1 is activated in response to accumulation of misfolded proteins within the endoplasmic reticulum as part of the unfolded protein response (UPR). It is a unique enzyme, possessing both kinase and RNase activity that is required for specific splicing of Xbp1 mRNA leading to UPR activation. How phosphorylation impacts on the Ire1 splicing activity is unclear. In this study, we isolate distinct phosphorylated species of Ire1 and assess their effects on RNase splicing both in vitro and in vivo. We find that phosphorylation within the kinase activation loop significantly increases RNase splicing in vitro. Correspondingly, mutants of Ire1 that cannot be phosphorylated on the activation loop show decreased specific Xbp1 and promiscuous RNase splicing activity relative to wild-type Ire1 in cells. These data couple the kinase phosphorylation reaction to the activation state of the RNase, suggesting that phosphorylation of the activation loop is an important step in Ire1-mediated UPR activation.