Activating mutations in the tyrosine kinase domain of HER2 (ErbB2) have been identified in human cancers. Compared with wild-type HER2, mutant HER2 shows constitutively activate kinase activity and increased oncogenicity. Cells transformed by mutant HER2 are resistant to epidermal growth factor receptor (EGFR) tyrosine kinase inhibitors and exhibit an attenuated response to the HER2 antibody trastuzumab. We investigated herein pathways through which mutant HER2 alters the extracellular environment, potentially leading to drug resistance and the effect of simultaneously targeting HER2 and the tumor cell microenvironment with a therapeutic intent. Expression of mutant HER2 in mammary epithelial cells activated autocrine transforming growth factor (TGF) beta1 signaling through a mechanism involving Rac1 and c-Jun N-terminal kinase-activating protein 1-dependent transcription. Cells transformed by an activating mutant of H-Ras (G12V) also expressed higher TGF-beta1 level through Rac1 activation. In addition, mutant HER2 induced the EGFR ligands TGF-alpha and amphiregulin at the mRNA and protein levels. Vascular endothelial growth factor, a target of the TGF-beta-Smad transcriptional regulation, was also induced as a result of expression of mutant HER2. Inhibition of TGF-beta signaling with the Alk5 small molecule inhibitor LY2109761 reduced growth and invasiveness of cells expressing mutant HER2. Combined inhibition of intracellular and paracrine effects of mutant HER2 by trastuzumab and the EGFR antibody cetuximab were more efficient than single-agent therapies. These data suggest that mutations in oncogenes such as HER2 and Ras not only alter intracellular signaling but also influence on other components of the tumor microenvironment by inducing several pro-invasive growth factors. In turn, these serve as extracellular targets of novel therapeutic strategies directed at both cancer-driving oncogenes and the modified tumor microenvironment.