XBP-1, a transcription factor that drives the unfolded protein response (UPR), is activated in B cells when they differentiate to plasma cells. Here, we show that in the B cells, whose capacity to secrete IgM has been eliminated, XBP-1 is induced normally on induction of differentiation, suggesting that activation of XBP-1 in B cells is a differentiation-dependent event, but not the result of a UPR caused by the abundant synthesis of secreted IgM. Without XBP-1, B cells fail to signal effectively through the B-cell receptor. The signalling defects lead to aberrant expression of the plasma cell transcription factors IRF4 and Blimp-1, and altered levels of activation-induced cytidine deaminase and sphingosine-1-phosphate receptor. Using XBP-1-deficient/Blimp-1-GFP transgenic mice, we find that XBP-1-deficient B cells form antibody-secreting plasmablasts in response to initial immunization; however, these plasmablasts respond ineffectively to CXCL12. They fail to colonize the bone marrow and do not sustain antibody production. These findings define the role of XBP-1 in normal plasma cell development and have implications for management of B-cell malignancies.