The Saccharomyces cerevisiae IRE1 gene, encoding a putative receptor-type protein kinase, is known to be required for inositol prototrophy and for the induction of a chaperon molecule, BiP, encoded by KAR2, under stress conditions such as tunicamycin addition. We have characterized a yeast gene, IRE2, which was isolated as a suppressor gene that complements the inositol auxotrophic phenotype of the ire1 mutation. Sequencing analysis revealed that IRE2 is identical to HAC1, which encodes a transcription factor having a basic-leucine zipper motif. Introduction of IRE2/HAC1 into the ire1 mutant clearly restored the expression of KAR2 upon tunicamycin treatment. ire2/hac1-disrupted yeast cells showed not only the inositol auxotrophic phenotype but also the tunicamycin sensitivity, and failed to induce the expression of KAR2. These results clearly indicate that the IRE2/HAC1 gene product plays a critical role in the induction of KAR2 expression and in the inositol prototrophy mediated by IRE1.