Association studies suggest that the thyroid hormone receptor β1 (TRβ1) could function as a tumor suppressor in cancer cells. However, the underlying molecular mechanisms remain to be elucidated. We explored how TRβ1 acted as a tumor suppressor in breast cancer MDA cells. Proliferation and invasiveness were markedly inhibited in cells stably expressing TRβ1 (MDA-TRβ1 cells). cSrc-phosphorylated TRβ1 at Y406 signaled T3-induced degradation. Mutation of Y406 to Phe (TRβ1Y406F) did not affect T3 binding affinity, but blocked T3-induced degradation in cells. Importantly, cell-based studies showed that TRβ1Y406F lost the inhibitory effects by TRβ1 on cell proliferation and invasion. Consistently, in xenograft models, MDA-TRβ1 cells exhibited significantly slower tumor growth rates than those of Neo control cells. In contrast, the tumor growth rates of MDA-TRβ1Y406F cells were indistinguishable from those of Neo control cells. We further showed that markedly more TRβ1Y406F than TRβ1 was physically associated with cSrc in cells, leading to constitutive activation of cSrc-FAK-ERK signaling. In contrast, degradation of T3-bound TRβ1 complexed with cSrc attenuated signaling to decrease cell proliferation and invasiveness, thus confirming TRβ1 as a tumor suppressor. Thus, the present studies suggested that TRβ1 could be tested as a novel potential therapeutic target.