The study investigates the role of GADD34 in the unfolded protein response (UPR) by screening a library of recombinant retroviruses for clones that inhibit the expression of a *CHOP::GFP* reporter. A retrovirus encoding the COOH terminus of GADD34 was isolated and found to attenuate *CHOP* activation by both protein malfolding in the endoplasmic reticulum and amino acid deprivation. Despite normal activity of the stress-inducible eIF2α kinases PERK and GCN2, phospho-eIF2α levels were significantly reduced in GADD34-overexpressing cells. GADD34 formed a complex with the catalytic subunit of protein phosphatase 1 (PP1c) that specifically promoted the dephosphorylation of eIF2α in vitro. Mutations that interfered with the interaction between GADD34 and PP1c prevented the dephosphorylation of eIF2α and blocked the attenuation of *CHOP* by GADD34. Expression of GADD34 is stress-dependent and absent in *PERK*^−/−^ and *GCN2*^−/−^ cells. These findings suggest that GADD34-mediated dephosphorylation of eIF2α is a negative feedback loop that inhibits stress-induced gene expression and promotes recovery from translational inhibition in the UPR.The study investigates the role of GADD34 in the unfolded protein response (UPR) by screening a library of recombinant retroviruses for clones that inhibit the expression of a *CHOP::GFP* reporter. A retrovirus encoding the COOH terminus of GADD34 was isolated and found to attenuate *CHOP* activation by both protein malfolding in the endoplasmic reticulum and amino acid deprivation. Despite normal activity of the stress-inducible eIF2α kinases PERK and GCN2, phospho-eIF2α levels were significantly reduced in GADD34-overexpressing cells. GADD34 formed a complex with the catalytic subunit of protein phosphatase 1 (PP1c) that specifically promoted the dephosphorylation of eIF2α in vitro. Mutations that interfered with the interaction between GADD34 and PP1c prevented the dephosphorylation of eIF2α and blocked the attenuation of *CHOP* by GADD34. Expression of GADD34 is stress-dependent and absent in *PERK*^−/−^ and *GCN2*^−/−^ cells. These findings suggest that GADD34-mediated dephosphorylation of eIF2α is a negative feedback loop that inhibits stress-induced gene expression and promotes recovery from translational inhibition in the UPR.