The molecular mechanisms underlying the development of hepatocellular carcinoma are not fully understood. Liver-specific signal transducer and activator of transcription (STAT) 5A/B-null mice (STAT5-LKO) were treated with carbon tetrachloride (CCl(4)), and histological analyses revealed liver fibrosis and tumors. Transforming growth factor (TGF)-beta levels and STAT3 activity were elevated in liver tissue from STAT5-LKO mice upon CCl(4) treatment. To define the molecular link between STAT5 silencing and TGF-beta up-regulation, as well as STAT3 activation, we examined STAT5-null mouse embryonic fibroblasts and primary hepatocytes. These cells displayed elevated TGF-beta protein levels, whereas messenger RNA levels remained almost unchanged. Protease inhibitor studies revealed that STAT5 deficiency enhanced the stability of mature TGF-beta. Immunoprecipitation and immunohistochemistry analyses demonstrated that STAT5, through its N-terminal sequences, could bind to TGF-beta and that retroviral-mediated overexpression of STAT5 decreased TGF-beta levels. To confirm the in vivo significance of the N-terminal domain of STAT5, we treated mice that expressed STAT5 lacking the N terminus (STAT5-DeltaN) with CCl(4). STAT5-DeltaN mice developed CCl(4)-induced liver fibrosis but no tumors. In conclusion, loss of STAT5 results in elevated TGF-beta levels and enhanced growth hormone-induced STAT3 activity. We propose that a deregulated STAT5-TGF-beta-STAT3 network contributes to the development of chronic liver disease.