Stat3beta is a short form of Stat3 that differs from the longer form (Stat3alpha) by the replacement of the C-terminal 55 amino acid residues of Stat3alpha by 7 residues specific to Stat3beta. In COS cells transfected with Stat3 expression plasmids, both Stat3alpha and Stat3beta were activated for DNA binding and transcription by the same set of growth factors and cytokines and both, when activated, formed homodimers and heterodimers with Stat1. Only Stat3beta was active in the absence of added cytokine or growth factor. Activation of each form, including constitutive activation of Stat3beta, was correlated with the phosphorylation of tyrosine 705. Activated Stat3beta in transfected COS cells was more stable and had greater DNA-binding activity than activated Stat3alpha. However, relative to DNA-binding activity, Stat3alpha showed greater transcriptional activity than Stat3beta. A mutant of Stat3alpha lacking its highly acidic C-terminal 48 amino acids had properties indistinguishable from Stat3beta. We conclude that Stat3alpha and Stat3beta have significantly different properties due to the presence or absence of the acidic C-terminal tail of Stat3alpha rather than the C-terminal sequence peculiar to Stat3beta. In addition to its effect on transcription, we speculate that the acidic tail may destabilize the active dimeric form of Stat3alpha, resulting in lower DNA-binding activity of the Y705-phosphorylated form compared to Stat3beta and in more rapid dephosphorylation.