We report on the identification of Fes1p (yBR101cp) as a cytosolic homologue of Sls1p, an endoplasmic reticulum (ER) protein previously shown to act as a nucleotide exchange factor for yeast BiP (M. Kabani, J.-M. Beckerich, and C. Gaillardin, Mol. Cell. Biol. 20:6923-6934, 2000). We found that Fes1p associates preferentially to the ADP-bound form of the cytosolic Hsp70 molecular chaperone Ssa1p and promotes nucleotide release. Fes1p activity was shown to be compartment and species specific since Sls1p and Escherichia coli GrpE could not substitute for Fes1p. Surprisingly, whereas Sls1p stimulated the ATPase activity of BiP in cooperation with luminal J proteins, Fes1p was shown to inhibit the Ydj1p-mediated activation of Ssa1p ATPase activity in steady-state and single-turnover assays. Disruption of FES1 in several wild-type backgrounds conferred a strong thermosensitive phenotype but partially rescued ydj1-151 thermosensitivity. The Delta fes1 strain was proficient for posttranslational protein translocation, as well as for the ER-associated degradation of two substrates. However, the Delta fes1 mutant showed increased cycloheximide sensitivity and a general translational defect, suggesting that Fes1p acts during protein translation, a process in which Ssa1p and Ydj1p are known to be involved. In support of this hypothesis, Fes1p was found to be associated with ribosomes.