Thyroid papillary carcinomas are characterized by RET/PTC (rearranged in transformation/papillary thyroid carcinoma) rearrangements that result in fusion of the tyrosine kinase domain of the RET receptor to the N-terminal sequences encoded by heterologous genes. This thyroid-specific rearrangement causes aberrant expression of RET/PTC and results in constitutive ligand-independent activation of RET kinase. However, it is unclear how RET/PTC activates the specific signaling pathways for cellular transformation. In this study, we show that RET/PTC associates with signal transducer and activator of transcription 3 (STAT3) and activates it by the specific phosphorylation of the tyrosine 705 residue. Activation of STAT3 requires the intrinsic kinase activity of RET/PTC; Janus tyrosine kinase and c-Src kinase are not involved in the RET/PTC-mediated activation of STAT3. RET/PTC-induced activation of STAT3 induces the STAT3-responsive genes, vascular endothelial growth factor, cyclin D1, and intercellular adhesion molecule 1. In addition, RET/PTC-mediated cellular transformation and proliferation of transformed cells require tyrosine 705 phosphorylation of STAT3 in NIH3T3 cells. We conclude that STAT3 activation by the RET/PTC tyrosine kinase is one of the critical signaling pathways for the regulation of specific genes, such as cyclin D1, vascular endothelial growth factor, and intercellular adhesion molecule 1, and for cellular transformation.