ErbB2 is overexpressed in approximately 30% of breast cancer patients with a correlation to poor prognosis. ErbB2 has been identified as a useful receptor for molecular targeting. A cyclic 20 amino acid phage display random peptide library was constructed using the fUSE5 gene III system. The library was panned against 2 different purified forms of the external domain of ErbB2. This resulted in the identification of several ErbB2-binding phage clones with variable binding to different ErbB2 preparations. One clone (EC-1) bound all preparations of ErbB2 including live cells and fresh frozen human breast cancer specimens. The synthetic peptide based on the deduced sequence of the EC-1 clone and its biotin-conjugated form retained binding affinity for purified ErbB2 and ErbB2 overexpressing cell lysates. EC-1 peptide was able to effectively inhibit the phosphorylation of ErbB2 on residues Y1248 and Y877 in a dose- and time-dependent manner. Furthermore, EC-1 peptide selectively inhibits the proliferation of ErbB2 overexpressing breast cancer cells. The linear portion of the cyclic EC-1 peptide was shown to be essential for binding ErbB2. In addition, 4 biased phage libraries were constructed allowing 4 different regions of the EC-1 peptide to have random sequence. Screening these EC-1 biased libraries did not result in higher affinity peptides but did demonstrate the importance of amino acids at position 1–4 on the N-terminal flanking arm and 11–15 within the cyclic ring. Interestingly, EC-1 contains homologous motifs with known ErbB receptor family ligands. We have identified a small peptide that binds to the extracellular domain of ErbB2, inhibits ErbB2 autophosphorylation and inhibits the proliferation of ErbB2 overexpressing cells. This supports the notion that small peptides can bind to targets important in cancer therapy even if a target does not have a natural ligand. Continuing research with this peptide includes increasing its affinity to ErbB2, evaluation of pharmacokinetics and evaluation of anti-proliferative effects with conjugate anti-cancer agents. © 2004 Wiley-Liss, Inc.