Heat shock protein 90 (Hsp90) is a eukaryotic chaperone responsible for the folding and functional activation of numerous client proteins, many of which are oncoproteins. Thus, Hsp90 inhibition has been intensely pursued, resulting in the development of many potential Hsp90 inhibitors, not all of which are well-characterized. Hsp90 inhibitors not only abrogate its chaperone functions, but also could help us gain insight into the structure-function relationship of this chaperone. Here, using biochemical and cell-based assays along with isothermal titration calorimetry, we investigate KU-32, a derivative of the Hsp90 inhibitor novobiocin (NB), for its ability to modulate Hsp90 chaperone function. Although NB and KU-32 differ only slightly in structure, we found that upon binding, they induce completely opposite conformational changes in Hsp90. We observed that NB and KU-32 both bind to the C-terminal domain of Hsp90, but surprisingly, KU-32 stimulated the chaperone functions of Hsp90 via allosteric modulation of its N-terminal domain, responsible for the chaperone`s ATPase activity. In vitro and in silico studies indicated that upon KU-32 binding, Hsp90 undergoes global structural changes leading to the formation of a `partially closed` intermediate that selectively binds ATP and increases ATPase activity. We also report that KU-32 promotes HeLa cell survival and enhances the refolding of an Hsp90 substrate inside the cell. This discovery explains the effectiveness of KU-32 analogs in the management of neuropathies and may facilitate the design of molecules that promote cell survival by enhancing Hsp90 chaperone function and reducing the load of misfolded proteins in cells.