Cysteine residues provide enzymes involved in signaling and metabolism with an allosteric mechanism to quickly respond to changes in the surrounding redox environment. Yet how thiol modifications impact enzyme structure and dynamics is poorly understood. Here, we apply single-molecule Förster resonance energy transfer (smFRET) to study redox-dependent conformational dynamics of a highly flexible oxidoreductase, protein disulfide isomerase (PDI), in solution. We demonstrate that PDI toggles in the millisecond timescale between two major conformational ensembles, “open” and “closed”, that differ ∼20Å in length due to relocation of the two catalytic domains, whose equilibrium distribution is modulated by the redox state. While reduced PDI predominantly populates the open ensemble, oxidized PDI visits both ensembles with similar probability. We provide evidence that i) transition from the open to the closed ensemble requires loss of free thiols, not disulfide bonding, as previously thought, and ii) exposure to small molecules that alkylate the catalytic cysteines and mutation of cysteines in the N-terminal active site shift PDI to the closed conformation. Finally, using mutational and kinetic analyses, we show that the fraction of open ensemble at equilibrium positively correlates with the reductase activity of PDI. This work forms the basis of a new dynamic mechanism of PDI regulation by a cysteine-based redox switch in which thiol-controlled equilibrium distribution of the open/closed ensembles dictates function.