Exposure of cells to various stresses often leads to the induction of a group of proteins called heat shock proteins (HSPs, molecular chaperones)^,. Hsp70 is one of the most highly inducible molecular chaperones, but its expression must be maintained at low levels under physiological conditions to permit constitutive cellular activities to proceed^,. Heat shock transcription factor 1 (HSF1) is the transcriptional regulator of HSP gene expression, but it remains poorly understood how newly synthesized HSPs return to basal levels when HSF1 activity is attenuated. CHIP (carboxy terminus of Hsp70-binding protein), a dual-function co-chaperone/ubiquitin ligase, targets a broad range of chaperone substrates for proteasomal degradation^,,,,,. Here we show that CHIP not only enhances Hsp70 induction during acute stress but also mediates its turnover during the stress recovery process. Central to this dual-phase regulation is its substrate dependence: CHIP preferentially ubiquitinates chaperone-bound substrates, whereas degradation of Hsp70 by CHIP-dependent targeting to the ubiquitin–proteasome system occurs when misfolded substrates have been depleted. The sequential catalysis of the CHIP-associated chaperone adaptor and its bound substrate provides an elegant mechanism for maintaining homeostasis by tuning chaperone levels appropriately to reflect the status of protein folding within the cytoplasm.