Abstract: Accumulation of unfolded proteins in the endoplasmic reticulum triggers the unfolded protein response (UPR). How the UPR is downregulated is not well understood. Inositol requirement 1 (Ire1) is an endoplasmic reticulum transmembrane UPR sensor in Saccharomyces cerevisiae. When the UPR is triggered, Ire1 is autophosphorylated, on Ser 840 and Ser 841, inducing the cytosolic endonuclease activity of Ire1, thereby initiating the splicing and translational de-repression of HAC1 mRNA. Homologous to Atf/Creb1 (Hac1) activates UPR transcription. Here, we report that the dose-dependent cell-cycle regulator 2 (Dcr2) phosphatase functionally and physically interacts with Ire1. We identified genetic interactions between DCR2 and genes, including IRE1, which are involved in secretory processes. Overexpression of DCR2, but not of a catalytically inactive DCR2 allele, significantly delays HAC1 splicing and sensitizes cells to the UPR. Furthermore, Dcr2 physically interacts in vivo with Ire1-S840E,S841E, which mimics phosphorylated Ire1, and Dcr2 de-phosphorylates Ire1 in vitro. Our results are consistent with de-phosphorylation of Ire1 being a mechanism for antagonizing UPR signalling.