The Saccharomyces cerevisiae basic leucine zipper transcription factor Hac1p is synthesized in response to the accumulation of unfolded polypeptides in the lumen of the endoplasmic reticulum (ER), and it is responsible for up-regulation of ∼5% of all yeast genes, including ER-resident chaperones and protein-folding catalysts. Hac1p is one of the most short-lived yeast proteins, having a half-life of ∼1.5 min. Here, we have shown that Hac1p harbors a functional PEST degron and that degradation of Hac1p by the proteasome involves the E2 ubiquitin-conjugating enzyme Ubc3/Cdc34p and the SCFCdc4 E3 complex. Consistent with the known nuclear localization of Cdc4p, rapid degradation of Hac1p requires the presence of a functional nuclear localization sequence, which we demonstrated to involve basic residues in the sequence 29RKRAKTK35. Two-hybrid analysis demonstrated that the PEST-dependent interaction of Hac1p with Cdc4p requires Ser146 and Ser149. Turnover of Hac1p may be dependent on transcription because it is inhibited in cell mutants lacking Srb10 kinase, a component of the SRB/mediator module of the RNA polymerase II holoenzyme. Stabilization of Hac1p by point mutation or deletion, or as the consequence of defects in components of the degradation pathway, results in increased unfolded protein response element-dependent transcription and improved cell viability under ER stress conditions.