The cochaperone p23 plays an important role in estrogen receptor alpha (ER) signal transduction. In this study, we investigated how p23 regulates ER target gene activation and affects tumor growth and progression. Remarkably, we found that changes in the expression of p23 differentially affected the activation of ER target genes in a manner dependent upon the type of DNA regulatory element. p23 overexpression enhanced the expression of the ER target genes cathepsin D and pS2, which are regulated by direct DNA binding of ER to estrogen response elements (ERE). In contrast, the expression of other target genes, including c-Myc, cyclin D1, and E2F1, to which ER is recruited indirectly through its interaction with other transcription factors remains unaffected by changes in p23 levels. The p23-induced expression of pS2 is associated with enhanced recruitment of ER to the ERE in the promoter, whereas ER recruitment to the ERE-less c-Myc promoter does not respond to p23. Intriguingly, p23-overexpressing MCF-7 cells exhibit increased adhesion and invasion in the presence of fibronectin. Our findings demonstrate that p23 differentially regulates ER target genes and is involved in the control of distinct cellular processes in breast tumor development, thus revealing novel functions of this cochaperone.