Rex1 (Zfp42), first identified as a gene that is transcriptionally repressed by retinoic acid (RA), encodes a zinc finger transcription factor expressed at high levels in F9 teratocarcinoma stem cells, embryonic stem cells, and other stem cells. Loss of both alleles of Rex1 by homologous recombination alters the RA-induced differentiation of F9 cells, a model of pluripotent embryonic stem cells. We identified Suppressor of Cytokine Signaling-3 (SOCS-3) as a gene that exhibits greatly increased transcriptional activation in RA, cAMP, and theophylline (RACT)-treated F9 Rex1(-/-) cells (approximately 25-fold) as compared to wild-type (WT) cells ( approximately 2.5-fold). By promoter deletion, mutation, and transient transfection analyses, we have shown that this transcriptional increase is mediated by the STAT3 DNA-binding elements located between -99 to -60 in the SOCS-3 promoter. Overexpression of STAT3 dominant-negative mutants greatly diminishes this SOCS-3 transcriptional increase in F9 Rex1(-/-) cells. This increase in SOCS-3 transcription is associated with a four- to fivefold higher level of tyrosine-phosphorylated STAT3 in the RACT-treated F9 Rex1(-/-) cells as compared to WT. Dominant-negative Src tyrosine kinase, Jak2, and protein kinase A partially reduce the transcriptional activation of the SOCS 3 gene in RACT-treated F9 Rex1 null cells. In contrast, parathyroid hormone peptide enhances the effect of RA in F9 Rex1(-/-) cells, but not in F9 WT. Thus, Rex1, which is highly expressed in stem cells, inhibits signaling via the Janus kinase (JAK)/signal transducer and activator of transcription (STAT) pathway, thereby modulating the differentiation of F9 cells.