Loss of the q22 band of chromosome 16 is a frequent genetic event in breast cancer, and the candidate tumor suppressor gene, ATBF1, has been implicated in breast cancer by genomic deletion, transcriptional down-regulation, and association with better prognostic parameters. In addition, estrogen receptor (ER)-positive breast cancer expresses a higher level of ATBF1, suggesting a role of ATBF1 in ER-positive breast cancer. In this study, we examined whether and how ATBF1 affects the ER function in breast cancer cells. We found that ATBF1 inhibited ER-mediated gene transcription, cell growth, and proliferation in ER-positive breast cancer cells. In vitro and in vivo immunoprecipitation experiments revealed that ATBF1 interacted physically with the ER and that multiple domains in both ATBF1 and ER proteins mediated the interaction. Furthermore, we demonstrated that ATBF1 inhibited ER function by selectively competing with the steroid receptor coactivator AIB1 but not GRIP1 or SRC1 for binding to the ER. These findings not only support the concept that ATBF1 plays a tumor-suppressive role in breast cancer, they also provide a mechanism for how ATBF1 functions as a tumor suppressor in breast cancer.