P58/DNAJc3 defends cells against endoplasmic reticulum (ER) stress. Most P58 molecules are translocated into the ER lumen, and here we report selective and stable binding to misfolded proteins by P58's TPR-containing N-terminal domain. In vitro, too, P58 binds selectively to a model misfolded protein and challenge of that complex with physiological concentrations of the ER lumenal Hsp70-type chaperone BiP encourages disassembly. BiP-induced dissociation of P58 from its substrate depends on the presence of ATP and on interactions with P58's J-domain, which are mediated by invariant residues BiP(R197) and P58(H422). A functional J-domain also accelerates dissociation of P58 from a model substrate, VSV-G(ts045), on the latter's re-folding in vivo. However, J-domain binding can be separated from the ability to promote substrate dissociation by the mutant BiP(E201G) and a wild-type J-domain fused ectopically to P58(H422Q) rescues the latter's inability to dissociate from substrate in response to BiP and ATP. These findings are consistent with a model whereby localized activation of the Hsp70-type partner is sufficient to promote substrate handover from the J-domain co-chaperone.