Deficiency of circulating alpha-1-antitrypsin (AAT) is the most widely recognized abnormality of a proteinase inhibitor that causes lung disease. AAT-deficiency is caused by mutations of the AAT gene that lead to AAT protein retention in the endoplasmic reticulum (ER). Moreover, the mutant AAT accumulated in the ER predisposes the homozygote to severe liver injuries, such as neonatal hepatitis, juvenile cirrhosis, and hepatocellular carcinoma. Despite the fact that mutant AAT protein is subject to ER-associated degradation (ERAD), yeast genetic studies have determined that the ubiquitination machinery, Hrd1/Der3p-cue1p-Ubc7/6p, which plays a prominent role in ERAD, is not involved in degradation of mutant AAT. Here we report that gp78, a ubiquitin ligase (E3) pairing with mammalian Ubc7 for ERAD, ubiquitinates and facilitates degradation of ATZ, the classic deficiency variant of AAT having a Z mutation (Glu 342 Lys). Unexpectedly, gp78 over-expression also significantly increases ATZ solubility. p97/VCP, an AAA ATPase essential for retrotranslocation of misfolded proteins from the ER during ERAD, is involved in gp78-mediated degradation of ATZ. Surprisingly, unlike other ERAD substrates that cause ER stress leading to apoptosis when accumulated in the ER, ATZ, in fact, increases cell proliferation when over-expressed in cells. This effect can be partially inhibited by gp78 over-expression. These data indicate that gp78 assumes multiple unique quality control roles over ATZ, including the facilitation of degradation and inhibition of aggregation of ATZ.