The interleukin-3 family of cytokines, which play an important role in the development of myeloid lineages, transduce signals through the JAK-STAT pathway. Previous studies demonstrate that this process entails the activation of four distinct isoforms of STAT5, where two shorter isoforms are activated in a distinct population of cells. We now demonstrate that the shorter isoforms represent carboxy-terminal truncations. Moreover, these truncations are not generated by RNA processing, but by a specific proteolytic activity. Consistent with the notion that truncated STAT5 isoforms transduce distinct signals, they fail to promote the activation of several known interleukin-3 target genes. These studies suggest that the activity of a specific protease may play a critical role in defining the biological responses transduced by STAT5.