Signal peptide-CUB-epidermal growth factor-like domain-containing protein 2 (SCUBE2), originally identified from the endothelium and several nonendothelial primary cell types, was recently shown to be expressed in invasive breast carcinomas. However, the protein localization and biological significance of SCUBE2 in breast cancer are unknown. In this report, we show by anti-SCUBE2 immunostaining that SCUBE2 is mainly expressed in vascular endothelial and mammary ductal epithelial cells in normal breast tissue. In addition, we observed positive staining for SCUBE2 in 55% (86 of 156) of primary breast tumors. Patients with positive SCUBE2 protein-expressing tumors had better prognosis than those with negative SCUBE2 protein-expressing tumors in terms of disease-free survival. Multivariate analysis confirmed SCUBE2 protein expression as an independent prognostic factor for disease-free survival. Furthermore, overexpression of ectopic SCUBE2 protein resulted in suppression of MCF-7 breast cancer cell proliferation and reduced MCF-7 xenograft tumor growth in nude mice. Molecular and biochemical analyses revealed that the COOH terminal region of SCUBE2 directly bound to and antagonized bone morphogenetic protein activity. Together, our results show for the first time that altered SCUBE2 expression is important in breast cancer progression and SCUBE2 may serve as a useful prognostic marker.