The endoplasmic reticulum (ER) provides an environment that is highly optimized for oxidative protein folding. Rather than relying on small molecule oxidants like glutathione, it is now clear that disulfide formation is driven by a protein relay involving Ero1, a novel conserved FAD-dependent enzyme, and protein disulfide isomerase (PDI); Ero1 is oxidized by molecular oxygen and in turn acts as a specific oxidant of PDI, which then directly oxidizes disulfide bonds in folding proteins. While providing a robust driving force for disulfide formation, the use of molecular oxygen as the terminal electron acceptor can lead to oxidative stress through the production of reactive oxygen species and oxidized glutathione. How Ero1p distinguishes between the many different PDI-related proteins and how the cell minimizes the effects of oxidative damage from Ero1 remain important open questions.