Estrogens, by binding to and activating two estrogen receptors (ERalpha and ERbeta), are critically involved in the development of the mammary gland and breast cancer. An isoform of ERbeta, ERbeta2 (also called ERbetacx), with an altered COOH-terminal region, is coexpressed with ERalpha in many human breast cancers. In this study, we generated a stable cell line from MCF7 breast cancer cells expressing an inducible version of ERbeta2, along with endogenous ERalpha, and examined the effects of ERbeta2 on the ERalpha protein levels and function. We showed that ERbeta2 inhibited ERalpha-mediated transactivation via estrogen response element and activator protein-1 sites of reporter constructs as well as the endogenous genes pS2 and MMP-1. Chromatin immunoprecipitation assays revealed that ERbeta2 expression caused a significant reduction in the recruitment of ERalpha to both the pS2 and MMP-1 promoters. Furthermore, ERbeta2 expression induced proteasome-dependent degradation of ERalpha. The inhibitory effects of ERbeta2 on ERalpha activity were further confirmed in HEK293 cells that lack functional endogenous ERs. We also showed that ERbeta2 can interact with ERalpha both in vitro and in mammalian cells, which is compatible with a model where ERbeta2/ERalpha heterodimers are targeted to the proteasome. Finally, in human breast cancer samples, we observed that expression of ERbeta2 significantly correlated with ERalpha-negative phenotype. Our data suggest that ERbeta2 could influence ERalpha-mediated effects relevant for breast cancer development, including hormone responsiveness.