The aim of the current study is to determine whether butein (3,4,2',4'-tetrahydroxychalcone) exhibits antiproliferative effects against tumor cells through suppression of the signal transducer and activator of transcription 3 (STAT3) activation pathway. We investigated the effects of butein on constitutive and inducible STAT3 activation, role of tyrosine kinases and phosphatases in STAT3 activation, STAT3-regulated gene products, and growth modulation of tumor cells. We found that this chalcone inhibited both constitutive and interleukin-6-inducible STAT3 activation in multiple myeloma (MM) cells. The suppression was mediated through the inhibition of activation of the upstream kinases c-Src, Janus-like kinase (JAK) 1, and JAK2. Vanadate treatment reversed the butein-induced down-regulation of STAT3 activation, suggesting the involvement of a tyrosine phosphatase. Indeed, we found that butein induced the expression of the tyrosine phosphatase SHP-1 and deletion of SHP-1 gene by small interfering RNA abolished the ability of butein to inhibit STAT3 activation, suggesting the critical role of SHP-1 in the action of this chalcone. Butein down-regulated the expression of STAT3-regulated gene products such as Bcl-xL, Bcl-2, cyclin D1, and Mcl-1, and this led to the suppression of proliferation and induction of apoptosis. Consistent with these results, overexpression of constitutive active STAT3 significantly reduced the butein-induced apoptosis. Moreover, we found that butein significantly potentiated the apoptotic effects of thalidomide and Velcade in MM cells. Overall, these results suggest that butein is a novel blocker of STAT3 activation and thus may have potential in suppression of tumor cell proliferation and reversal of chemoresistance in MM cells.