In this work, we provide evidence for a conserved mechanism of activation of the endoplasmic reticulum (ER) stress sensor protein IRE1. IRE1 is a bifunctional enzyme; it is a kinase/endoRNase, and is the most conserved of all ER stress sensor proteins known to date, being found from yeast to metazoans. While much of the signal transduction mechanism of IRE1 has been worked out in yeast and in metazoans, the precise mechanism by which IRE1 detects unfolded proteins in the lumen of the ER had remained controversial. Previous work from the lab of Peter Walter, based on on the crystal structure of yeast Ire1's ER-lumenal stress sensor domain, led to a model of activation in which unfolded proteins act as direct ligands that drive the oligomerization and activation of yeast Ire1. However, differences between the crystal structures of yeast Ire1 and mammalian IRE1 suggested an alternative mechanism, as unfolded proteins would have a hard time serving as ligands for mammalian IRE1 because its sensor domain exhibits a "closed" conformation that would not allow peptide binding. Using state-of-the-art nuclear magnetic resonance, and biophysical and biochemical methods, we show that peptides can bind the sensor domain of human IRE1, and that this binding causes conformational changes that are conducive to the oligomerization and subsequnt activation of the enzyme. Last, in in vivo experiments, we show that impairing the lumenal domain-driven oligomerization of human IRE1 results in lack of activation in living cells. Our data suggests that the "closed' conformation observed in the crystal structure of mammalian IRE1 is one of many possible conformational states populated by IRE1's stress sensor lumenal domain. Together, our findings support the notion of a conserved unfolded peptide ligand-driven activation mechanisms for IRE1 that is crucial for its function.