Overexpression of the HER2 receptor is observed in about 30% of breast and ovarian cancers and is often associated with an unfavorable prognosis. We have recently designed an anti-HER2 peptide (AHNP) based on the structure of the CDR-H3 loop of the anti-HER2 rhumAb 4D5 and showed that this peptide can mimic some functions of rhumAb 4D5. The peptide disabled HER2 tyrosine kinases in vitro and in vivo similar to the monoclonal antibody (Park, B.-W. et al. Nat. Biotechnol. 2000, 18, 194--198). AHNP has been shown to selectively bind to the extracellular domain of the HER2 receptor with a submicromolar affinity in Biacore assays. In the present paper, we demonstrate that in addition to being a structural and functional mimic of rhumAb 4D5, AHNP can also effectively compete with the antibody for binding to the HER2 receptor indicating a similar binding site for the peptide and the parental antibody. To further develop AHNP as an antitumor agent useful for preclinical trials and as a radiopharmaceutical to be used for tumor imaging, a number of derivatives of AHNP have been designed. Structure--function relationships have been studied using surface plasmon resonance technology. Some of the AHNP analogues have improved binding properties, solubility, and cytotoxic activity relative to AHNP. Residues in the exocyclic region of AHNP appear to be essential for high-affinity binding. Kinetic and equilibrium analysis of peptide-receptor binding for various AHNP analogues revealed a strong correlation between peptide binding characteristics and their biological activity. For AHNP analogues, dissociation rate constants have been shown to be better indicators of peptide biological activity than receptor-binding affinities. This study demonstrates a possibility of mimicking the well-documented antibody effects and its applications in tumor therapy by much smaller antibody-based cyclic peptides with potentially significant therapeutic advantages. Strategies used to improve binding properties of rationally designed AHNP analogues are discussed.