Interleukin-6 (IL-6) induces either differentiation or growth of a variety of cells. Little is known about the molecular basis of this cellular decision. The family of signal transducer and activator of transcription (Stat) proteins are involved in signaling through a variety of cytokine and growth factor receptors, although their biological roles have not been established. To address whether Stat proteins play roles in IL-6-induced growth or differentiation, we introduced two types of mutant Stat3 acting in a dominant-negative manner into M1 leukemic cells which respond to IL-6 with growth arrest and terminal differentiation. We show that dominant-negative forms of Stat3 inhibited both IL-6-induced growth arrest at G(0)/G1 and macrophage differentiation in the M1 transformants. Blocking of Stat activation resulted in inhibition of IL-6-induced repression of c-myb and c-myc. Furthermore, IL-6 enhanced the growth of M1 cells primarily through shortening the length of the G1 period when Stat3 was suppressed. Thus IL-6 generates both growth-enhancing signals and growth arrest- and differentiation-inducing signals at the same time. Stat3 may be a key molecule which determines the cellular decision from cell growth to differentiation in M1 cells.