One typical mechanism to promote genomic instability, a hallmark of cancer, is to inactivate tumor suppressors, such as PALB2. It has recently been reported that mutations in PALB2 increase the risk of breast cancer by 8–9-fold by age 40 and the life time risk is ∼3–4-fold. To date, predicting the functional consequences of PALB2 mutations has been challenging as they lead to different cancer risks. Here, we performed a structure–function analysis of PALB2, using PALB2 truncated mutants (R170fs, L531fs, Q775X and W1038X), and uncovered a new mechanism by which cancer cells could drive genomic instability. Remarkably, the PALB2 W1038X mutant, harboring a mutation in its C-terminal domain, is still proficient in stimulating RAD51-mediated recombination in vitro, although it is unusually localized to the cytoplasm. After further investigation, we identified a hidden NES within the WD40 domain of PALB2 and found that the W1038X truncation leads to the exposure of this NES to CRM1, an export protein. This concept was also confirmed with another WD40-containing protein, RBBP4. Consequently, our studies reveal an unreported mechanism linking the nucleocytoplasmic translocation of PALB2 mutants to cancer formation.