Mechanistic studies of deregulated ERG in prostate cancer and other cancers continue to enhance its role in cancer biology and its utility as a biomarker and therapeutic target. Here, we show that ERG, through its physical interaction with androgen receptor, induces AR aggregation and endoplasmic reticulum stress in the prostate glands of ERG transgenic mice. Histomorphological alterations and the expression of ER stress sensors Atf6, Ire1α, Perk, their downstream effectors Grp78/BiP and eIF2α in ERG transgenic mouse prostate glands indicate the presence of chronic ER stress. Transient activation of apoptotic cell death during early age correlated well with the differential regulation of ER stress sensors, in particular Perk. Epithelial cells derived from ERG transgenic mouse prostates have increased prostasphere formation with resistance to radiation induced cell death. Continued activation of cell survival factors, Atf6 and Ire1α during chronic ER stress due to presence of ERG in prostate epithelium induces survival pathways and provides a selection pressure in the continuum of ERG dependent neoplastic process. These novel insights will enhance the understanding of the mechanistic functions of ERG in prostate tumor biology and towards development of early targeted therapeutic strategies for prostate cancer.