The initiation of breast cancer is associated with increased expression of tumor-promoting estrogen receptor α (ERα) protein and decreased expression of tumor-suppressive ERβ protein. However, the mechanism underlying this process is unknown. Here we show that PES1 (also known as Pescadillo), an estrogen-inducible protein that is overexpressed in breast cancer, can regulate the balance between ERα and ERβ. We found that PES1 modulated many estrogen-responsive genes by enhancing the transcriptional activity of ERα while inhibiting transcriptional activity of ERβ. Consistent with this regulation of ERα and ERβ transcriptional activity, PES1 increased the stability of the ERα protein and decreased that of ERβ through the ubiquitin-proteasome pathway, mediated by the carboxyl terminus of Hsc70-interacting protein (CHIP). Moreover, PES1 transformed normal human mammary epithelial cells and was required for estrogen-induced breast tumor growth in nude mice. Further analysis of clinical samples showed that expression of PES1 correlated positively with ERα expression and negatively with ERβ expression and predicted good clinical outcome in breast cancer. Our data demonstrate that PES1 contributes to breast tumor growth through regulating the balance between ERα and ERβ and may be a better target for the development of drugs that selectively regulate ERα and ERβ activities.