The Bowman-Birk inhibitor (BBI), a soybean-derived protease inhibitor with well-characterized ability to inhibit trypsin and chymotrypsin activities, has been shown to be an effective suppressor of carcinogenesis and treated in human phase IIa clinical trial. However, the precise mechanisms by which BBI suppresses carcinogenesis are unknown. In this study, we demonstrated that BBI specifically and potently inhibits the proteasomal chymotrypsin-like activity in vitro and in vivo in MCF7 breast cancer cells. Proteasome inhibition by BBI is associated with accumulation of ubiquitinated proteins and the proteasome substrates, p21Cip1/WAF1 and p27Kip1, accompanied with downregulation of cyclin D1 and cyclin E which could arrest cell cycle at G1/S phase. Moreover, BBI suppressed MCF7 cell growth and had a novel effect on the decrease of phosphorylated extracellular signal-related kinases (ERK1/2). However, BBI was unable to inactivate ERK1/2 in the presence of a phosphatase inhibitor or a transcription inhibitor suggesting the involvement of a specific phosphatase. We found an induction of MAP kinase phosphatase-1 (MKP-1) in dose- and time-dependent manner correlated with dephosphorylation of ERK1/2 in BBI-treated MCF7 cells. In addition, BBI exhibited no inhibitory effects on EGF-stimulated activation of ERK1/2 and Akt. Together, we suggested that BBI abates proteasome function and results in upregulation of MKP-1, which in turn suppresses ERK1/2 activity. Our results support the notion that proteasome inhibition by BBI is a novel mechanism that contributes to prevention of cancer and further provides evidence that soybean products have the potential to advance as chemopreventive agents.