Our laboratory has previously cloned and purified an ovarian protein found to be a novel 17β-hydroxysteroid dehydrogenase type 7 enzyme (HSD17B7) (formerly prolactin receptor-associated protein) that converts the weak estrogen, estrone, to the highly potent estradiol. The regulation of this enzyme has not yet been explored. In this report, we show high expression of HSD17B7 in human ductal carcinoma and breast cancer cell lines and present evidence for a strong up-regulation of this enzyme by estradiol at the level of mRNA, protein expression, and promoter activity in MCF-7 cells. The effect of estradiol is mediated by estrogen receptor (ER)α, whereas ERβ prevents this stimulation. ER antagonists, ICI 182,780 and 4-hydroxytamoxifen, prevent estradiol-induced stimulation of the endogenously expressed HSD17B7, suggesting that these inhibitors not only block estradiol action but also its production. We have identified a -185-bp region of the hsd17b7 promoter that is highly conserved among rat, mouse, and human and confers regulation by estradiol in MCF-7 cells. This region is devoid of a classical estradiol-response element but contains a nuclear factor 1 (NF1) site that is essential for estradiol action. We found that estradiol stimulates the recruitment and DNA binding of NF1 to this region of the hsd17b7 promoter. Furthermore, knockdown of NF1 family members, NF1B, NF1A, and NF1X, completely prevents induction of this gene by estradiol. In summary, our findings demonstrate that estradiol stimulates HSD17B7 transcriptional activity in breast cancer cells through a novel mechanism requiring NF1 and strongly suggest a positive feedback mechanism to increase local estradiol synthesis causing growth of estrogen-dependent breast cancers.