The association between inflammation and endoplasmic reticulum (ER) stress has been observed in many diseases. However, if and how chronic inflammation regulates the unfolded protein response (UPR) and alters ER homeostasis in general, or in the context of chronic disease, remains unknown. Here, we show that, in the setting of obesity, inflammatory input through increased inducible nitric oxide synthase (iNOS) activity causes S-nitrosylation of a key UPR regulator, IRE1 alpha, which leads to a progressive decline in hepatic IRE1 alpha-mediated XBP1 splicing activity in both genetic (ob/ob) and dietary (high-fat diet-induced) models of obesity. Finally, in obese mice with liver-specific IRE1 alpha deficiency, reconstitution of IRE1 alpha expression with a nitrosylation-resistant variant restored IRE1 alpha-mediated XBP1 splicing and improved glucose homeostasis in vivo. Taken together, these data describe a mechanism by which inflammatory pathways compromise UPR function through iNOS-mediated S-nitrosylation of IRE1 alpha, which contributes to defective IRE1 alpha activity, impaired ER function, and prolonged ER stress in obesity.