The majority of the secretory and transmembrane proteins are folded in the endoplasmic reticulum (ER). When unfolded proteins accumulate in the ER, a collective of signalling pathways, termed the unfolded protein response (UPR), are activated to restore the ER protein folding homeostasis. The most evolutionarily conserved branch of UPR is mediated by the kinase/endoribonuclease Ire1. Ire1 mediates a cytosolic non-conventional mRNA splicing reaction of HAC1 mRNA in yeast and XBP1 mRNA in mammalian cells. The spliced HAC1/XBP1 mRNA is translated and produces a functional transcription factor, which initiates a transcriptional response to restore the protein folding homeostasis. The HAC1/XBP1 mRNA splicing reaction is biochemically distinct from the ones that are catalyzed by the spliceosome. Here, we review recent studies that provide a mechanistic understanding of the non-conventional mRNA splicing reaction.