Crosstalk between the oestrogen receptor (ER) and ERBB2/HER-2 pathways has long been implicated in breast cancer aetiology and drug response, yet no direct connection at a transcriptional level has been shown. Here we show that oestrogen–ER and tamoxifen–ER complexes directly repress ERBB2 transcription by means of a cis-regulatory element within the ERBB2 gene in human cell lines. We implicate the paired box 2 gene product (PAX2), in a previously unrecognized role, as a crucial mediator of ER repression of ERBB2 by the anti-cancer drug tamoxifen. We show that PAX2 and the ER co-activator AIB-1/SRC-3 compete for binding and regulation of ERBB2 transcription, the outcome of which determines tamoxifen response in breast cancer cells. The repression of ERBB2 by ER-PAX2 links these two breast cancer subtypes and suggests that aggressive ERBB2-positive tumours can originate from ER-positive luminal tumours by circumventing this repressive mechanism. These data provide mechanistic insight into the molecular basis of endocrine resistance in breast cancer.