Native protein disulfide bond formation in the endoplasmic reticulum (ER) requires protein disulfide isomerase (PDI) and Ero1p. Here we show that oxidizing equivalents flow from Ero1p to substrate proteins via PDI. PDI is predominantly oxidized in wild-type cells but is reduced in an ero1-1 mutant. Direct dithiol-disulfide exchange between PDI and Ero1p is indicated by the capture of PDI–Ero1p mixed disulfides. Mixed disulfides can also be detected between PDI and the ER precursor of carboxypeptidase Y (CPY). Further, PDI1 is required for the net formation of disulfide bonds in newly synthesized CPY, indicating that PDI functions as an oxidase in vivo. Together, these results define a pathway for protein disulfide bond formation in the ER. The PDI homolog Mpd2p is also oxidized by Ero1p.