Inactivation of p27 Kip1 is implicated in tumorigenesis and has both prognostic and treatment-predictive values for many types of human cancer. The transcription factor Stat1 is essential for innate immunity and tumor immunosurveillance through its ability to act downstream of interferons. Herein, we demonstrate that Stat1 functions as a suppressor of Ras transformation independently of an interferon response. Inhibition of Ras transformation and tumorigenesis requires the phosphorylation of Stat1 at tyrosine 701 but is independent of Stat1 phosphorylation at serine 727. Stat1 induces p27 Kip1 expression in Ras transformed cells at the transcriptional level through mechanisms that depend on Stat1 phosphorylation at tyrosine 701 and activation of Stat3. The tumor suppressor properties of Stat1 in Ras transformation are reversed by the inactivation of p27 Kip1. Our work reveals a novel functional link between Stat1 and p27 Kip1, which act in coordination to suppress the oncogenic properties of activated Ras. It also supports the notion that evaluation of Stat1 phosphorylation in human tumors may prove a reliable prognostic factor for patient outcome and a predictor of treatment response to anticancer therapies aimed at activating Stat1 and its downstream effectors.