Modulating cytoplasmic Ca2+ concentration ([Ca2+]i) by endoplasmic reticulum (ER)-localized inositol 1,4,5-trisphosphate receptor (InsP3R) Ca2+-release channels is a universal signaling pathway that regulates numerous cell-physiological processes. Whereas much is known regarding regulation of InsP3R activity by cytoplasmic ligands and processes, its regulation by ER-luminal Ca2+ concentration ([Ca2+]ER) is poorly understood and controversial. We discovered that the InsP3R is regulated by a peripheral membrane-associated ER-luminal protein that strongly inhibits the channel in the presence of high, physiological [Ca2+]ER. The widely-expressed Ca2+-binding protein annexin A1 (ANXA1) is present in the nuclear envelope lumen and, through interaction with a luminal region of the channel, can modify high-[Ca2+]ER inhibition of InsP3R activity. Genetic knockdown of ANXA1 expression enhanced global and local elementary InsP3-mediated Ca2+ signaling events. Thus, [Ca2+]ER is a major regulator of InsP3R channel activity and InsP3R-mediated [Ca2+]i signaling in cells by controlling an interaction of the channel with a peripheral membrane-associated Ca2+-binding protein, likely ANXA1.