Immunoglobulin production by myeloma plasma cells depends on the unfolded protein response for protein production and folding. Recent studies have highlighted the importance of IRE1 alpha and X box binding protein 1 (XBP1), key members of this pathway, in normal B-plasma cell development. We have determined the gene expression levels of IRE1 alpha, XBP1, XBP1UNSPLICED (XBP1u), and XBP1SPLICED (XBP1s) in a series of patients with myeloma and correlated findings with clinical outcome. We show that IRE1 alpha and XBP1 are highly expressed and that patients with low XBP1s/u ratios have a significantly better overall survival. XBP1s is an independent prognostic marker and can be used with beta 2 microglobulin and t(4;14) to identify a group of patients with a poor outcome. Further-more, we show the beneficial therapeutic effects of thalidomide in patients with low XBP1s/u ratios. This study highlights the importance of XBP1 in myeloma and its significance as an independent prognostic marker and as a predictor of thalidomide response. This trial was registered at www.controlled-trials.com/ISRCTN68454111/68454111 as #ISRCTN684541111. (Blood. 2010; 116(2): 250-253)