Cloned sequences encoding a truncated form of the HER2 receptor were obtained from cDNA libraries derived from two HER2-overexpressing human breast cancer cell lines, BT-474 and SK-BR-3. The 5' 2.1 kb of the encoded transcript is identical to that of full-length 4.6-kb HER2 transcript and would be expected to produce a secreted form of HER2 receptor containing only the extracellular ligand binding domain (ECD). The 3' end of the truncated transcript diverges 61 nucleotides before the receptor's transmembrane region, reads through a consensus splice donor site containing an in-frame stop codon, and contains a poly(A) addition site, suggesting that the truncated transcript arises by alternative RNA processing. S1 nuclease protection assays show a 40-fold variation in the abundance of the truncated 2.3-kb transcript relative to full-length 4.6-kb transcript in a panel of eight HER2-expressing tumor cell lines of gastric, ovarian, and breast cancer origin. Expression of this truncated transcript in COS-1 cells produces both secreted and intracellular forms of HER2 ECD; however, immunofluorescent labeling of HER2 ECD protein in MKN7 tumor cells that natively overexpress the 2.3-kb transcript suggests that transcriptionally generated HER2 ECD is concentrated within the perinuclear cytoplasm. Metabolic labeling and endoglycosidase studies suggest that this HER2 ECD (100 kDa) undergoes differential trafficking between the endoplasmic reticulum and Golgi compartments compared with full-length (185-kDa) HER2 receptor. Transfection studies indicate that excess production of HER2 ECD in human tumor cells overexpressing full-length HER2 receptor can result in resistance to the growth-inhibiting effects of anti-HER2 monoclonal antibodies such as muMAb4D5. These findings demonstrate alternative processing of the HER2 transcript and implicate a potentially important growth regulatory role for intracellularly sequestered HER2 ECD in HER2-amplified human tumors.