In this phase III, multinational, randomized trial, the International Breast Cancer Study Group, Breast International Group, and the National Surgical Adjuvant Breast and Bowel Project will attempt to define the effectiveness of cytotoxic therapy for patients with locoregional recurrence of breast cancer. We will evaluate whether chemotherapy prolongs disease-free survival and, secondarily, whether its use improves overall survival and systemic disease-free survival. Quality of life measurements will be monitored during the first 12 months of the study. Women who have had a previous diagnosis of invasive breast cancer treated by mastectomy or breast-conserving surgery and who have undergone complete surgical excision of all macroscopic disease but who subsequently develop isolated local and/or regional ipsilateral invasive recurrence are eligible. Patients are randomized to observation/no adjuvant chemotherapy or to adjuvant chemotherapy; all suitable patients receive radiation, hormonal, and trastuzumab therapy. Radiation therapy is recommended for patients who have not received previous adjuvant radiation therapy but is required for those with microscopically positive margins. The radiation field must encompass the tumor bed plus a surrounding margin to a dose of >or= 40 Gy. Radiation therapy will be administered before, during, or after chemotherapy. All women with estrogen receptor-positive and/or progesterone receptor-positive recurrence must receive hormonal therapy, with the agent and duration to be determined by the patient's investigator. Adjuvant trastuzumab therapy is permitted for those with HER2- positive tumors, provided that intent to treat is declared before randomization. Although multidrug regimens are preferred, the agents, doses, and use of supportive therapy are at the discretion of the investigator.