The extranuclear estrogen receptor pathway opens up novel perspectives in many physiological and pathological processes, especially in breast carcinogenesis. However, its function and mechanisms are not fully understood. Herein we present data identifying Shp2, a SH2-containing tyrosine phosphatase, as a critical component of extranuclear ER pathway in breast cancer. The research checked that the effect of Shp2 on the tumor formation and growth in animal model and investigated the regulation of Shp2 on the bio-effect and signaling transduction of estrogen in breast cancer cell lines. The results showed that Shp2 was highly expressed in more than 60% of total 151 breast cancer cases. The inhibition of Shp2 activity by PHPS1 (a Shp2 inhibitor) delayed the development of dimethylbenz(a)anthracene (DMBA)-induced tumors in the rat mammary gland and also blocked tumor formation in MMTV-pyvt transgenic mice. Estradiol (E2) stimulated protein expression and phosphorylation of Shp2, and induced Shp2 binding to ERα and IGF-1R around the membrane to facilitate the phosphorylation of Erk and Akt in breast cancer cells MCF7. Shp2 was also involved in several biological effects of the extranuclear ER-initiated pathway in breast cancer cells. Specific inhibitors (phps1, phps4 and NSC87877) or small interference RNAs (siRNA) of Shp2 remarkably suppressed E2-induced gene transcription (Cyclin D1 and trefoil factor 1 (TFF1)), rapid DNA synthesis and late effects on cell growth. These results introduced a new mechanism for Shp2 oncogenic action and shed new light on extranuclear ER-initiated action in breast tumorigenesis by identifying a novel associated protein, Shp2, for extranuclear ER pathway, which might benefit the therapy of breast cancer.