Ubiquitin (Ub) and ubiquitin-like (UBL) proteins regulate a diverse array of cellular pathways through covalent as well as non-covalent interactions with target proteins. Yeast protein Mdy2 (Get5) and its human homolog GdX (Ubl4a) belong to the class of UBL proteins which do not form conjugates with other proteins. Mdy2 is required for cell survival under heat stress and for efficient mating. As part of a complex with Sgt2 and Get4 it has been implicated in the biogenesis of tail-anchored proteins. Interestingly, in response to heat stress, Mdy2 protein that is predominantly localized in the nucleus co-localized with poly(A)-binding protein Pab1 to cytoplasmic stress granules suggesting that nucleocytoplasmic shuttling is of functional importance. Here we investigate the nuclear import of Mdy2, a process that is independent of the Get4/Sgt2 complex but required for stress response. Nuclear import is mediated by an N-terminal nuclear localization signal (NLS) and this process is essential for the heat stress response. In contrast, cells expressing Mdy2 lacking a nuclear export signal (NES) behave like wild type. Importantly, both Mdy2 and Mdy2-ΔNES, but not Mdy2-ΔNLS, physically interact with Pab1 and this interaction correlates with the accumulation in cytoplasmic stress granules. Thus, the nuclear history of the UBL Mdy2 appears to be essential for its function in cytoplasmic stress granules during the rapid cellular response to heat stress.