Cohort studies of breast cancer (BC) patients, but not of disease‐free women at inclusion, have found menopausal hormone therapy (MHT) to be associated with decreased BC specific mortality (BCM). Here, the German population‐based MARIEplus BC cohort was analyzed to further elucidate associations of prediagnostic MHT with BCM (and modification by tumor characteristics), recurrence, and secondarily with other cause and overall mortality. Enrolled 2002–2005, incident invasive BC cases (N = 3,321) were followed up for a median of 6.1 years. Cox proportional hazards models adjusted for tumor characteristics, mammography and lifestyle were applied. Compared with never users of MHT, current users at date of diagnosis had significantly lower BCM (Hazard ratio (HR) 0.72, 95% CI 0.53–0.97) and risk of recurrence (HR 0.61, 95% CI 0.46–0.82). The MHT related reduced BCM was confined to patients with low grade tumors (HR 0.44, 95% CI 0.28–0.70; phet = 0.01) and not modified by estrogen receptor or nodal status. BCM decreased with MHT duration in current and increased in past users (phet = 0.015). Mortality due to causes other than BC and overall mortality were also reduced in current MHT users (HR 0.51, 95% CI 0.32–0.81, HR 0.66, 95% CI 0.52–0.86, respectively). Favorable tumor characteristics and mammographic surveillance could not fully explain associations of current MHT use with BCM and recurrence risk. Thus, the study contributes to the evidence that prediagnostic MHT does not have a negative impact on prognosis after BC. The restriction of a reduced BCM to low grade tumors should be confirmed in independent studies. What's New? Despite numerous studies, the impact of menopausal hormone therapy (MHT) on survival after breast cancer diagnosis remains ambiguous. Here, analyses performed on a German population‐based cohort consisting of more than 3,300 patients reveal significant inverse associations between MHT use at diagnosis and breast cancer‐specific mortality (BCM), recurrence risk, and other‐cause mortality. Among current MHT users, BCM was found to decrease with duration of therapy. The reduction in BCM, however, was confined to patients with only low‐grade tumors, a novel finding that warrants further inquiry.