Human epidermal growth factor receptor 2 (ERBB2 or HER2) amplification/overexpression is associated with a particularly aggressive molecular subtype of breast cancer (BC), characterized by a poor prognosis, increased metastatic potential, and disease recurrence. As only approximately 50% of HER2-positive patients respond to HER2-targeted therapies, greater knowledge of the biology of HER2 and the mechanisms that underlie drug susceptibility is needed to improve cure rates. Evidence suggests that the coexistence of full-length, wild-type HER2 (wtHER2) and altered forms of HER2—such as carboxy-terminus-truncated fragments, activating mutations, and splice variants—significantly increases the heterogeneity of HER2-positive disease, affecting its biology, clinical course, and treatment response. In particular, expression of the d16HER2 splice variant in human HER2-positive BC has a crucial pathobiological function, wherein the absence of sixteen amino acids from the extracellular domain induces the formation of stable and constitutively active HER2 homodimers on the tumor cell surface. Notably, the d16HER2 variant significantly influences the initiation and aggressiveness of tumors, cancer stem cell properties, epithelial–mesenchymal transition (EMT), and the susceptibility of HER2-positive BC cells to trastuzumab compared with its wtHER2 counterpart, thus constituting a novel and potentially clinically useful biomarker. The aims of this review are to summarize the existing evidence regarding the pathobiological functions of the d16HER2 variant and discuss its current and future value with regard to risk assessment and treatment choices in HER2-positive disease.