HKH40A, the 8-methoxy analog of WMC79, is a synthetic agent with promising in vitro and in vivo antitumor activity, especially against solid tumors. However, molecular mechanisms underlying its antitumor effects are poorly understood. Here, we report that HKH40A markedly reduces the level of GRP78/BiP protein in cancer cell lines of various origin. In this study, we show that HKH40A not only downregulates transcription of GRP78 but also directly binds to the isolated protein and induces its proteosomal degradation. Knockdown of BiP increased the efficacy of the drug and overexpression of BiP diminished its activity. BiP is generally highly elevated in solid tumors having a pivotal role in cancer cell survival and chemoresistance, and has been suggested as a novel target for therapeutic intervention. We show that reduction of BiP level by HKH40A impairs its function and induces unfolded protein response as evidenced by the activation of IRE1α, ATF6 and PERK. This leads to a series of downstream events, including sustained eIF2α phosphorylation, increased abundance of spliced XBP1 mRNA and protein levels of ATF4 and CHOP. We also demonstrate that HKH40A inhibited tumor formation in an in vivo xenograft tumor model. Collectively, our data show that HKH40A reduces BiP levels and this could have an important role in the activity of HKH40A against cancer cells.