Ubc7p is a ubiquitin-conjugating enzyme (E2) that functions with endoplasmic reticulum (ER)-resident ubiquitin ligases (E3s) to promote endoplasmic reticulum-associated degradation (ERAD). Ubc7p only functions in ERAD if bound to the ER surface by Cue1p, a membrane-anchored ER protein. The role of Cue1p was thought to involve passive concentration of Ubc7p at the surface of the ER. However, our biochemical studies of Ubc7p suggested that Cue1p may, in addition, stimulate Ubc7p E2 activity. We have tested this idea and found it to be true both in vitro and in vivo. Ubc7p bound to the soluble domain of Cue1p showed strongly enhanced in vitro ubiquitination activity, both in the presence and absence of E3. Cue1p also enhanced Ubc7p function in vivo, and this activation was separable from the established ER-anchoring role of Cue1p. Finally, we tested in vivo activation of Ubc7p by Cue1p in an assay independent of the ER membrane and ERAD. A chimeric E2 linking Ubc7p to the Cdc34p/Ubc3p localization domain complemented the cdc34-2 TS phenotype, and co-expression of the soluble Cue1p domain enhanced complementation by this chimeric Ubc7p E2. These studies reveal a previously unobserved stimulation of Ubc7p E2 activity by Cue1p that is critical for full ERAD and that functions independently of the well known Cue1p anchoring function. Moreover, it suggests a previously unappreciated mode for regulation of E2s by Cue1p-like interacting partners.