DnaJ proteins often bind to unfolded substrates and recruit their Hsp70 partners. This induces a conformational change in the Hsp70 that stabilizes its binding to substrate. By some unknown mechanism, the DnaJ protein is released. We examined the requirements for the release of ERdj3, a mammalian ER DnaJ, from substrates and found that BiP promoted the release of ERdj3 only in the presence of ATP. Mutations in ERdj3 or BiP that disrupted their interaction interrupted the release of ERdj3. BiP mutants that were defective in any step of the ATPase cycle were also unable to release ERdj3. These results demonstrate that a functional interaction between ERdj3 and BiP, including both a direct interaction and the ability to stimulate BiP's ATPase activity are required to release ERdj3 from substrate and support a model where ERdj3 must recruit BiP and stimulate its high-affinity association with the substrate through activation of ATP hydrolysis to trigger its own release from substrates. On the basis of similarities among DnaJs and Hsp70s, this is likely to be applicable to other Hsp70-DnaJ pairs.