IRE1 transduces the unfolded protein response by splicing XBP1 through its C-terminal cytoplasmic kinase-RNase region. IRE1 autophosphorylation is coupled to RNase activity through formation of a back-to-back dimer, although the conservation of the underlying molecular mechanism is not clear from existing structures. We have crystallized human IRE1 in a back-to-back conformation only previously seen for the yeast homologue. In our structure the kinase domain appears primed for catalysis but the RNase domains are disengaged. Structure-function analysis reveals that IRE1 is autoinhibited through a Tyr-down mechanism related to that found in the unrelated Ser/Thr protein kinase Nek7. We have developed a compound that potently inhibits human IRE1 kinase activity while stimulating XBP1 splicing. A crystal structure of the inhibitor bound to IRE1 shows an increased ordering of the kinase activation loop. The structures of hIRE in apo and ligand-bound forms are consistent with a previously proposed model of IRE1 regulation in which formation of a back-to-back dimer coupled to adoption of a kinase-active conformation drive RNase activation. The structures provide opportunities for structure-guided design of IRE1 inhibitors.