Accumulation of misfolded proteins in the endoplasmic reticulum (ER) activates the ER membrane kinases PERK and IRE1 leading to the unfolded protein response (UPR). We show here that UPR activation triggers PERK and IRE1 segregation from BiP and their sorting with misfolded proteins to the ER-derived quality control compartment (ERQC), a pericentriolar compartment that we had identified previously. PERK phosphorylates translation factor eIF2alpha, which then accumulates on the cytosolic side of the ERQC. Dominant negative PERK or eIF2alpha(S51A) mutants prevent the compartmentalization, whereas eIF2alpha(S51D) mutant, which mimics constitutive phosphorylation, promotes it. This suggests a feedback loop where eIF2alpha phosphorylation causes pericentriolar concentration at the ERQC, which in turn amplifies the UPR. ER-associated degradation (ERAD) is an UPR-dependent process; we also find that ERAD components (Sec61beta, HRD1, p97/VCP, ubiquitin) are recruited to the ERQC, making it a likely site for retrotranslocation. In addition, we show that autophagy, suggested to play a role in elimination of aggregated proteins, is unrelated to protein accumulation in the ERQC.