Transient protein synthesis inhibition is an important protective mechanism used by cells during various stress conditions including endoplasmic reticulum (ER) stress. This response centers on the phosphorylation state of eukaryotic initiation factor (eIF)-2 alpha, which is induced by kinases like protein kinase R-like ER kinase (PERK) and GCN2 to suppress translation and is later reversed so translation resumes. GADD34 was recently identified as the factor that activates the type 1 protein serine/threonine phosphatase (PP1), which dephosphorylates eIF-2 alpha during cellular stresses. Our study delineates a negative feedback regulatory loop in which the eIF-2 alpha-controlled inhibition of protein translation leads to GADD34 induction, which promotes translational recovery. We show that activating transcription factor-4 (ATF4), which is paradoxically translated during the eIF-2 alpha-mediated translational block, is required for the transactivation of the GADD34 promoter in response to ER stress and amino acid deprivation. ATF4 directly binds to and trans-activates a conserved ATF site in the GADD34 promoter during ER stress. Examination of ATF4-/- MEFs revealed an absence of GADD34 induction, prolonged eIF-2 alpha phosphorylation, delayed protein synthesis recovery, and diminished translational up-regulation of BiP during ER stress. These studies demonstrate the essential role of GADD34 in the resumption of protein synthesis, define the pathway for its induction, and reveal that cytoprotective unfolded protein response targets like BiP are sensitive to the eIF-2 alpha-mediated block in translation.