Studies indicate that estrogen receptor (ER) α mediates breast cancer-promoting effects of estrogens. The role of ERβ in breast cancer is unknown. Elucidating the role of ERβ in the pathogenesis of breast cancer is important because many human breast tumors express both ERα and ERβ. We show that adenovirus-mediated expression of ERβ changes the phenotype of ERα-positive MCF-7 cells. Estradiol increases cell proliferation and causes tumor formation of MCF-7 cells expressing only ERα. In contrast, introducing ERβ into MCF-7 cells causes an inhibition of proliferation in vitro and prevents tumor formation in a mouse xenograft model in response to estradiol. ERβ 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 G₂ cell cycle arrest. These results demonstrate that ERα and ERβ produce opposite effects in MCF-7 cells on cell proliferation and tumor formation. Natural or synthetic ERβ-selective estrogens may lack breast cancer promoting properties exhibited by estrogens in hormone replacement regimens and may be useful for chemoprevention of breast cancer.