The estrogen receptor (ER) is a member of a large superfamily of nuclear receptors that regulates the transcription of estrogen‐responsive genes. Several recent studies have demonstrated that XBP‐1 mRNA expression is associated with ERα status in breast tumors. However, the role of XBP‐1 in ERα signaling remains to be elucidated. More recently, two forms of XBP‐1 were identified due to its unconventional splicing. We refer to the spliced and unspliced forms of XBP‐1 as XBP‐1S and XBP‐1U, respectively. Here, we report that XBP‐1S and XBP‐1U enhanced ERα‐dependent transcriptional activity in a ligand‐independent manner. XBP‐1S had stronger activity than XBP‐1U. The maximal effects of XBP‐1S and XBP‐1U on ERα transactivation were observed when they were co‐expressed with full‐length ERα. SRC‐1, the p160 steroid receptor coactivator family member, synergized with XBP‐1S or XBP‐1U to potentiate ERα activity. XBP‐1S and XBP‐1U bound to the ERα both in vitro and in vivo in a ligand‐independent fashion. XBP‐1S and XBP‐1U interacted with the ERα region containing the DNA‐binding domain. The ERα‐interacting regions on XBP‐1S and XBP‐1U have been mapped to two regions, including the N‐terminal basic region leucine zipper domain (bZIP) and the C‐terminal activation domain. The bZIP‐deleted mutants of XBP‐1S and XBP‐1U completely abolished ERα transactivation by XBP‐1S and XBP‐1U. These findings suggest that XBP‐1S and XBP‐1U may directly modulate ERα signaling in both the absence and presence of estrogen and, therefore, may play important roles in the proliferation of normal and malignant estrogen‐regulated tissues.