The endoplasmic reticulum (ER) is responsible for protein folding, modification, and trafficking. Accumulation of unfolded or misfolded proteins represents the condition of ER stress and triggers the unfolded protein response (UPR), a key mechanism linking supply of excess nutrients to insulin resistance and type 2 diabetes in obesity. The ER harbors proteins that participate in protein folding including protein disulfide isomerases (PDIs). Changes in PDI activity are associated with protein misfolding and ER stress. Here, we show that thioredoxin-interacting protein (Txnip), a member of the arrestin protein superfamily and one of the most strongly induced proteins in diabetic patients, regulates PDI activity and UPR signaling. We found that Txnip binds to PDIs and increases their enzymatic activity. Genetic deletion of Txnip in cells and mice led to increased protein ubiquitination and splicing of the UPR regulated transcription factor X-box-binding protein 1 (Xbp1s) at baseline as well as under ER stress. Our results reveal Txnip as a novel direct regulator of PDI activity and a feedback mechanism of UPR signaling to decrease ER stress.