TROP-2, a tumor-associated antigen, has been implicated in the progression of various epithelial tumors. Due to its favorable expression profile, TROP-2 has emerged as a promising target for antibody–drug conjugates (ADCs) based anti-tumor therapies. Although ADCs have shown efficacy in cancer treatment, their application in solid tumors is hindered by their high molecular weight, poor tumor penetration, and release of cytotoxic molecules. Therefore, a recombinant immunotoxin was developed based on a shark-derived variable domain of immunoglobulin new antigen receptor (VNAR) antibody. VNARs are only one-tenth the size of IgG antibodies and possess remarkable tissue penetration capabilities and high stability. In this study, a shark VNAR phage display library was created, leading to the identification of shark VNAR-5G8 that targets TROP-2. VNAR-5G8 exhibited a high affinity and cellular internalization ability towards cells expressing high levels of TROP-2. Epitope analysis revealed that VNAR-5G8 recognizes a hidden epitope consisting of CRD and TY-1 on TROP-2. Subsequently, VNAR-5G8 was fused with a truncated form of Pseudomonas exotoxin (PE38) to create the recombinant immunotoxin (5G8-PE38), which exhibited significant anti-tumor activity in vitro and in vivo. Overall, this study highlights the promise of 5G8-PE38 as a valuable candidate for cancer therapy.