In planta secretion of fungal pathogen proteins, including effectors destined for the plant cell cytoplasm, is critical for disease progression. However, little is known about the endoplasmic reticulum (ER) secretion mechanisms used by these pathogens. To determine if normal ER function is crucial for fungal pathogenicity, Magnaporthe oryzae genes encoding proteins homologous to yeast Lhs1p and Kar2p, members of the heat shock protein 70 family in Saccharomyces cerevisiae, were cloned and characterized. Like their yeast counterparts, both LHS1 and KAR2 proteins localized in the ER and functioned in an unfolded protein response (UPR) similar to the yeast UPR. Mutants produced by disruption of LHS1 were viable but showed a defect in the translocation of proteins across the ER membrane and reduced activities of extracellular enzymes. The Deltalhs1 mutant was severely impaired not only in conidiation, but also in both penetration and biotrophic invasion in susceptible rice (Oryza sativa) plants. This mutant also had defects in the induction of the Pi-ta resistance gene-mediated hypersensitive response and in the accumulation of fluorescently-labeled secreted effector proteins in biotrophic interfacial complexes. Our results suggest that proper processing of secreted proteins, including effectors, by chaperones in the ER is requisite for successful disease development and for determining host-pathogen compatibility via the gene-for-gene interaction.