EBNA3C is an EBV-encoded nuclear protein, essential for proliferation of EBV infected B-lymphocytes. Using EBNA3C amino acids 365-545 in a yeast two hybrid screen, we found an interaction with the Growth Arrest and DNA-damage protein, Gadd34. When both proteins are overexpressed, Gadd34 can interact with EBNA3C in both nuclear and cytoplasmic compartments. Amino acids 483-610 of Gadd34, including the two PP1a interaction, and the HSV-1 ICPγ34.5 homology domains, are required for the interaction. Furthermore, interaction is lost with a mutant of EBNA3C ( 509 DVIEVID 515→AVIAVIA), that abolishes EBNA3C coactivation ability as well as SUMO interaction[ 1]. In B-cells, Gadd34, and EBNA3C are present in a complex with PP1a using microcystin sepharose affinity purification, Using a lymphoblastoid cell line in which EBNA3C protein levels are conditional on hydroxytamoxifen, surprisingly, we found that (i) EBNA3C maintains phosphorylation of eIF2α at serine 51, and (ii) protects against ER stress induced activation of the unfolded protein response as measured by XBP1 (u) versus XBP1(s) protein expression and N-terminal ATF6 cleavage. In reporter assays, overexpression of Gadd34 enhances EBNA3C's ability to co-activate EBNA2 activation of the LMP1 promoter. Collectively the data suggest that EBNA3C interacts with Gadd34, activating the upstream component of the UPR (eIF2α phosphorylation) while preventing downstream UPR events (XBP1 activation and ATF6 cleavage).