Polypeptide binding by the chaperone Hsp70 is regulated by its ATPase activity, which is itself regulated by co-chaperones including the Bag domain nucleotide exchange factors. Here, we tested the functional contribution of residues in the Bag domain of Bag-1M that contact Hsp70. Two point mutations, E212A and E219A, partially reduced co-chaperone activity, whereas the point mutation R237A completely abolished activity in vitro. Based on the strict positional conservation of the Arg-237 residue, several Bag domain proteins were predicted from various eukaryotic genomes. One candidate, Snl1p from Saccharomyces cerevisiae, was confirmed as a Bag domain co-chaperone. Snl1p bound specifically to the Ssa and Ssb forms of yeast cytosolic Hsp70, as revealed by two-hybrid screening and co-precipitations from yeast lysate. In vitro, Snl1p also recognized mammalian Hsp70 and regulated the Hsp70 ATPase activity identically to Bag-1M. Point mutations in Snl1p that disrupted the conserved residues Glu-112 and Arg-141, equivalent to Glu-212 and Arg-237 in Bag-1M, abolished the interaction with Hsp70 proteins. In live yeast, mutated Snl1p could not substitute for wild-type Snl1p in suppressing the lethal defect caused by truncation of the Nup116p nuclear pore component. Thus, Snl1p is the first Bag domain protein identified in S. cerevisiae, and its interaction with Hsp70 is essential for biological activity.