Potential tumor suppressor p42, ErbB3-binding protein 1 (EBP1) inhibits phosphoinositide 3-kinase (PI3K) activity reducing the p85 regulatory subunit. In this study, we demonstrated that overexpression of p42 promoted not only a reduction of wild type of p85 subunit but also oncogenic mutant forms of p85 which were identified in human cancers. Moreover, we identified the small fragment of C-terminal domain of p42 is sufficient to exhibit tumor suppressing activity of p42-WT, revealing that this small fragment (280-394) of p42 is required for the binding of both HSP70 and CHIP for a degradation of p85. Furthermore, we showed the small fragment of p42 markedly inhibited the tumor growth in mouse xenograft models of brain and breast cancer, resembling tumor suppressing activity of p42. Through identification of the smallest fragment of p42 that is responsible for its tumor suppressor activity, our findings represent a novel approach for targeted therapy of cancers that overexpress PI3K.