We have recently reported that accumulation of misfolded nuclear hormone receptor corepressor (N-CoR) as insoluble protein aggregates in acute promyelocytic leukemia (APL) cells induces endoplasmic reticulum (ER) stress and activates unfolded protein response (UPR). Although accumulation of misfolded proteins is known to trigger UPR-induced cytotoxic cell death in several neurodegenerative disorders, APL cells are notably resistant to UPR-induced apoptosis. The molecular basis for the paradoxical response of APL cells to UPR is not known. Here, we report that a glycoprotease, selectively expressed in APL cells, regulates the response of APL cells to UPR-induced apoptosis through processing of misfolded N-CoR protein. Results show that misfolded N-CoR is cleaved selectively in APL cells, and cellular extracts of APL cells and human primary APL cells contain activity that cleaves N-CoR protein. Purification and spectrometric analysis of N-CoR cleaving activity from an APL cell line reveals that it is a glycoprotein endopeptidase known as OSGEP. Furthermore, the cleavage of N-CoR in APL cells could be blocked by the broad-spectrum protease inhibitor AEBSF and by RNA interference-mediated down-regulation of OSGEP expression. AEBSF selectively inhibits growth and promotes apoptosis of APL cells possibly through a mechanism involving AEBSF-induced accumulation of insoluble N-CoR protein and by triggering ER stress. Taken together, these findings suggest that selective induction of protease activity in APL cells may represent a novel cytoprotective component of UPR, which could be exploited by tumor cells to survive the toxic insult of misfolded protein(s).