Signaling via Jak2/STAT3 is critically important for normal dendritic cell (DC) differentiation. In addition, we have previously demonstrated that hyperactivation of the Jak2/STAT3 pathway induced by tumor-derived factors (TDF) may be responsible for abnormal DC differentiation in cancer. In this study, using a novel selective inhibitor of Jak2/STAT3, JSI-124, we investigated the mechanism of the Jak2/STAT3 effect on DCs and the possibility of pharmacological regulation of DC differentiation in cancer. Our experiments have demonstrated that JSI-124 overcomes the differentiation block induced by TDF and promotes the differentiation of mature DCs and macrophages. Surprisingly, inhibition of Jak2/STAT3 signaling resulted in dramatic activation of immature DCs generated in the presence of TDF as well as in control medium. This activation manifested in up-regulation of MHC class II, costimulatory molecules, and a dramatic increase in the ability to stimulate allogeneic or Ag-specific T cells. Inhibition of Jak2/STAT3 signaling resulted in activation of the transcription factor NF-kappaB. This up-regulation was not due to a conventional pathway involving IkappaB alpha, but was probably due to a block of the dominant negative effect of STAT3. This indicates that Jak2/STAT3 play an important role in negative regulation of DC activation, and pharmacological inhibition of the Jak2/STAT3 pathway can be used to enhance DC function.