The estrogen receptor (ER) plays important roles in the development and progression of breast cancer, and is a major target for tumor therapy. In this study, we investigated ER function in two derivatives of MCF-7 cells that were selected for their ability to proliferate in the absence of estrogen or in the presence of the antiestrogen, tamoxifen. Reporter gene assays indicated decreased ER activity in both cells lines, although the activity remaining retained responsiveness to both estrogen and tamoxifen. The decreased ER activity correlated with expression of a 61 kDa variant ER protein, and sequencing of RT-PCR products indicated that this variant was the product of an exon 3 deletion (ERΔE3). To study its effects on cell proliferation, ERΔE3 cDNA was stably transfected into both the MCF-7 cell line and its estrogen-independent/tamoxifen-sensitive derivative MCF-7/LCC1 (LCC1), and the phenotypes of transfectants were examined. Expression of ERΔE3 was not sustainable in MCF-7 cells, but was maintained for at least 17 passages in LCC1 cells. These results are in agreement with previous reports that ERΔE3 inhibits wild-type ER activity and negatively regulates proliferation of MCF-7 cells. They further suggest that the alteration that leads to estrogen independence in LCC1 cells allows for sustained expression of ERΔE3, and that additional changes are required to confer tamoxifen resistance to these cells.