The recently discovered Canis familiaris papillomavirus (PV) type 2 (CfPV2) provides a unique opportunity to study PV gene functions in vitro and in vivo. Unlike the previously characterized canine oral PV, CfPV2 contains an E5 open reading frame and is associated with progression to squamous cell carcinoma. In the current study, we have expressed and characterized the CfPV2-encoded E5 protein, a small, hydrophobic, 41-amino-acid polypeptide. We demonstrate that, similar to the E5 protein from high-risk human PV type 16, the CfPV2 E5 protein is localized in the endoplasmic reticulum (ER) and that its expression decreases keratinocyte proliferation and cell life span. E5 expression also increases the percentage of cells in the G(1) phase of the cell cycle, with a concomitant decrease in the percentage of cells in S phase. To identify a potential mechanism for E5-mediated growth inhibition from the ER, we developed a real-time PCR method to quantify the splicing of XBP1 mRNA as a measure of ER stress. We found that the CfPV2 E5 protein induced ER stress and that this, as well as the observed growth inhibition, is tempered significantly by coexpression of the CfPV2 E6 and E7 genes. It is possible that the spatial/temporal regulation of E6/E7 gene expression during keratinocyte differentiation might therefore modulate E5 activity and ER stress.