Studies indicate that estrogen receptor (ER) alpha mediates breast cancer-promoting effects of estrogens. The role of ERbeta in breast cancer is unknown. Elucidating the role of ERbeta in the pathogenesis of breast cancer is important because many human breast tumors express both ERalpha and ERbeta. We show that adenovirus-mediated expression of ERbeta changes the phenotype of ERalpha-positive MCF-7 cells. Estradiol increases cell proliferation and causes tumor formation of MCF-7 cells expressing only ERalpha. In contrast, introducing ERbeta into MCF-7 cells causes an inhibition of proliferation in vitro and prevents tumor formation in a mouse xenograft model in response to estradiol. ERbeta inhibits proliferation by repressing c-myc, cyclin D1, and cyclin A gene transcription, and increasing the expression of p21(Cip1) and p27(Kip1), which leads to a G(2) cell cycle arrest. These results demonstrate that ERalpha and ERbeta produce opposite effects in MCF-7 cells on cell proliferation and tumor formation. Natural or synthetic ERbeta-selective estrogens may lack breast cancer promoting properties exhibited by estrogens in hormone replacement regimens and may be useful for chemoprevention of breast cancer.