Kaposi's sarcoma (KS)-associated herpesvirus (KSHV) is a human gammaherpesvirus recognized as the principal causative agent of KS and primary effusion lymphoma (PEL). KSHV establishes persistent latent infection in B lymphocytes where viral gene expression is restricted, in part, by a cohesin-dependent chromosome conformation. Here, we show that endoplasmic reticulum (ER) stress induces a rapid, caspase-dependent cleavage of cohesin subunit RAD21. ER stress-induced cleavage of RAD21 correlated with a rapid and strong viral lytic transcriptional activation. This effect was observed in several KSHV positive PEL cells, but not in other B-cells or non-B-cell models of KSHV latency. The cleaved-RAD21 does not dissociate from viral genomes, nor disassemble from other components of the cohesin complex. However, RAD21 cleavage correlated with the disruption of the latency genome conformation as revealed by chromosome conformation capture (3C). Ectopic expression of C-terminal RAD21 cleaved form could partially induce KSHV lytic genes transcription in BCBLI cells, suggesting that ER-stress induced RAD21 cleavage was sufficient to induce KSHV reactivation from latency in PEL cells. Taken together our results reveal a novel aspect for control and maintenance of KSHV genome latency conformation mediated by stress-induced RAD21 cleavage. Our studies also suggest that RAD21 cleavage may be a general regulatory mechanism for rapid alteration of cellular chromosome conformation and cohesin-dependent transcription regulation.