Resistance to current human epidermal growth factor receptor 2 (HER2) inhibitors, such as trastuzumab (Ttzm), is a major unresolved clinical problem in HER2-positive breast cancer (HER2-BC). Because HER2 remains overexpressed in drug-resistant HER2-BC cells, we investigated whether PEPD can overcome the resistance. PEPD is a recombinant enzymatically inactive mutant of human peptidase D, which strongly inhibits HER2 in cancer cells by binding to its extracellular domain. Here, we show that PEPD is highly active in preclinical models of HER2-BC resistant to Ttzm and other HER2 inhibitors and also enhances the therapeutic efficacy of paclitaxel. The therapeutic activity is underscored by its ability to bind to HER2 and free it from protection by mucin 4, disrupt its interplay with other receptor tyrosine kinases, and subsequently direct HER2 for degradation. PEPD also down-regulates epidermal growth factor receptor, which contributes to drug resistance in HER2-BC. In contrast, Ttzm, whose therapeutic activity also depends on its binding to the extracellular domain of HER2, cannot perform any of these functions of PEPD PEPD inhibits HER2-BC cells and tumors that carry clinically relevant molecular changes that confer resistance to Ttzm. Our results show that HER2 remains a critical target in drug-resistant HER2-BC and that PEPD is a promising agent for overcoming drug resistance in this disease.