The complex multistep activation cascade of Ire1 involves changes in the Ire1 conformation and oligomeric state. Ire1 activation enhances ER folding capacity, in part by overexpressing the ER Hsp70 molecular chaperone BiP; in turn, BiP provides tight negative control of Ire1 activation. This study demonstrates that BiP regulates Ire1 activation through a direct interaction with Ire1 oligomers. Particularly, we demonstrated that the binding of Ire1 luminal domain (LD) to unfolded protein substrates not only trigger conformational changes in Ire1-LD that favour the formation of Ire1-LD oligomers but also exposes BiP binding motifs, enabling the molecular chaperone BiP to directly bind to Ire1-LD in an ATP-dependent manner. These transient interactions between BiP and two short motifs in the disordered region of Ire1-LD are reminiscent of interactions between clathrin and another Hsp70, cytoplasmic Hsc70. BiP binding to substrate-bound Ire1-LD oligomers enables unfolded protein substrates and BiP to synergistically and dynamically control Ire1-LD oligomerisation, helping to return Ire1 to its deactivated state when an ER stress response is no longer required.