Inositol-requiring enzyme 1 (IRE1) is an evolutionarily conserved sensor of endoplasmic reticulum (ER) stress and mediates a key branch of the unfolded protein response in eukaryotic cells. It is an ER-resident transmembrane protein that possesses Ser/Thr protein kinase and endoribonuclease (RNase) activities in its cytoplasmic region. IRE1 is activated through dimerization/oligomerization and autophosphorylation at multiple sites, acting through its RNase activity to restore the functional capacity of the ER. However, it remains poorly defined in vivo how the autophosphorylation events of endogenous IRE1 govern its dynamic activation and functional output. Here, we generated a mouse model harboring a S724A knock-in mutation (Ern1S724A/S724A) and investigated the importance of phosphorylation at Ser724 within the kinase activation loop of murine IRE1α. We found that in mouse embryonic fibroblast cells and in primary hepatocytes, S724A mutation resulted in markedly reduced IRE1α autophosphorylation in parallel with blunted activation of its RNase activity to catalyze X-box binding protein 1 (Xbp1) mRNA splicing. Furthermore, ablation of IRE1α phosphorylation at Ser724 exacerbated ER stress–induced hepatic steatosis in tunicamycin-treated Ern1S724A/S724A mice. This was accompanied by significantly decreased hepatic production of spliced XBP1 protein but increased CCAAT-enhancer–binding protein homologous protein (CHOP) level, along with suppressed expression of key metabolic regulators of fatty acid β-oxidation and lipid secretion. These results demonstrate a critical role of phosphorylation at Ser724 of IRE1α in dynamically controlling its kinase activity, and thus its autophosphorylation state, which is coupled to activation of its RNase activity in counteracting hepatic steatosis under ER stress conditions.