We describe a Pap1–Oxs1 pathway for diamide-induced disulfide stress in Schizosaccharomyces pombe, where the nucleocytoplasmic HMG protein Oxs1 acts cooperatively with Pap1 to regulate transcription. Oxs1 and Pap1 form a complex when cells are exposed to diamide or Cd that causes disulfide stress. When examined for promoters up-regulated by diamide, effective Pap1 binding to these targets requires Oxs1, and vice versa. With some genes, each protein alone enhances transcription, but the presence of both exerts an additive positive effect. In other genes, although transcription is induced by diamide, Oxs1 or Pap1 plays a negative role with full de-repression requiring loss of both proteins. In a third class of genes, Oxs1 positively regulates expression, but in its absence, Pap1 plays a negative role. The Oxs1–Pap1 regulatory interaction appears evolutionarily conserved, as heterologous (human, mouse and Arabidopsis) Oxs1 and Pap1-homologues can bind interchangeably with each other in vitro, and at least in the fission yeast, heterologous Oxs1 and Pap1-homologues can substitute for S. pombe Oxs1 and Pap1 to enhance stress tolerance.