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Defects in protein homeostasis can induce proteotoxic stress, affecting cellular fitness and, consequently, overall tissue health. In various growing tissues, cell competition based mechanisms facilitate detection and elimination of these compromised, often referred to as 'loser', cells by the healthier neighbors. The precise connection between proteotoxic stress and competitive cell survival remains largely elusive. Here, we reveal the function of an endoplasmic reticulum (ER) and Golgi localized protein Rer1 in the regulation of protein homeostasis in the developing Drosophila wing epithelium. Our results show that loss of Rer1 leads to proteotoxic stress and PERK-mediated phosphorylation of eukaryotic initiation factor 2α. Clonal analysis showed that rer1 mutant cells are identified as losers and eliminated through cell competition. Interestingly, we find that Rer1 levels are upregulated upon Myc-overexpression that causes overgrowth, albeit under high proteotoxic stress. Our results suggest that increased levels of Rer1 provide cytoprotection to Myc-overexpressing cells by alleviating the proteotoxic stress and thereby supporting Myc-driven overgrowth. In summary, these observations demonstrate that Rer1 acts as a novel regulator of proteostasis in Drosophila and reveal its role in competitive cell survival. Author summary: In developing tissues, cells can stochastically acquire defects that can reduce their fitness. To maintain the overall health of tissues, these unfit cells are identified by the healthier neighboring cells and eliminated via a juxtacrine-acting cellular fitness sensing mechanism called cell competition. An example of such physiological regulation of cellular fitness is the maintenance of proteostasis. Defects in maintaining proteostasis cause proteotoxic stress. Interestingly, proteotoxic stress is observed not only in the unfit loser cells but also in the overgrowing super-competitor cells, for instance, cells with higher levels of Myc. How cell competition is linked to the maintenance of proteostasis is poorly understood. In this study, we have characterized for the first time the function of Drosophila Rer1 protein in development. We demonstrate that Rer1 is essential for maintaining protein homeostasis and loss of Rer1 activates stress-induced unfolded protein responses. Cells lacking Rer1 are identified as unfit cells and become losers when juxtaposed to the normal neighboring cells. Moreover, we show that Myc-overexpressing cells upregulate Rer1 levels, which allows them to maintain a higher demand for stress regulation, caused by increased protein translation. In this work, we propose that Rer1 functions as a stress regulator and that modulating its levels could provide cytoprotection under stress conditions. [ABSTRACT FROM AUTHOR]