Stat transcription factors have been implicated in tumorigenesis in mice and men. Stat3 and Stat5 are considered powerful proto-oncogenes, whereas Stat1 has been demonstrated to suppress tumor formation. We demonstrate here for the first time that a constitutive active version of Stat3alpha (Stat3alphaC) may also suppress transformation. Mouse embryonic fibroblasts (MEFs) deficient for p53 can be transformed with either c-myc or with rasV12 alone. Interestingly, transformation by c-myc is efficiently suppressed by co-expression of Stat3alphaC, but Stat3alphaC does not interfere with transformation by the rasV12-oncogene. In contrast, transplantation of bone marrow cells expressing Stat3alphaC induces the formation of a highly aggressive T cell leukemia in mice. The leukemic cells invaded multiple organs including lung, heart, salivary glands, liver and kidney. Interestingly, transplanted mice developed a similar leukemia when the bone marrow cells were transduced with Stat3beta, which is also constitutively active when expressed at significant levels. Our experiments demonstrate that Stat3 has both - tumor suppressing and tumor promoting properties.