HER2, a ligand-free tyrosine kinase receptor of the HER family, is frequently overexpressed in breast cancer. The anti-HER2 antibody trastuzumab has shown significant clinical benefits in metastatic breast cancer; however, resistance to trastuzumab is common. The development of monoclonal antibodies that have complementary mechanisms of action results in a more comprehensive blockade of ErbB2 signaling, especially HER2/HER3 signaling. Use of such antibodies may have clinical benefits if these antibodies can become widely accepted. Here, we describe a novel anti-HER2 antibody, hHERmAb-F0178C1, which was isolated from a screen of a phage display library. A step-by-step optimization method was employed to maximize the inhibitory effect of this anti-HER2 antibody. Crystallographic analysis was used to determine the three-dimensional structure to 3.5 Å resolution, confirming that the epitope of this antibody is in domain III of HER2. Moreover, this novel anti-HER2 antibody exhibits superior efficacy in blocking HER2/HER3 heterodimerization and signaling, and its use in combination with pertuzumab has a synergistic effect. Characterization of this antibody revealed the important role of a ligand binding site within domain III of HER2. The results of this study clearly indicate the unique potential of hHERmAb-F0178C1, and its complementary inhibition effect on HER2/HER3 signaling warrants its consideration as a promising clinical treatment.