The yeast KAR2 gene was isolated by complementation of a mutation that blocks nuclear fusion. The predicted KAR2 protein sequence is most homologous to mammalian BiP/GRP78 and has several structural features in common with it: a functional secretory signal sequence, a yeast endoplasmic reticulum retention signal (HDEL) at the carboxyl terminus, and the absence of potential N-linked glycosylation sites. Moreover KAR2 is regulated like BiP/GRP78: the level of mRNA is increased by drug treatments and mutations that cause accumulation of secretory precursors in the endoplasmic reticulum. However, unlike BiP/GRP78, KAR2 is also regulated by heat shock. Deletion of the KAR2 gene generated a recessive lethal mutation, showing that BiP/GRP78 function is required for cell viability.