Signal transducers and activators of transcription (STAT) proteins can be conditionally activated in response to epidermal growth factor (EGF) and interferon (IFN)-gamma. STAT activation was correlated with cell growth inhibition in response to EGF and IFN-gamma. Activated STAT proteins’ specifically recognized the conserved STAT-responsive elements in the promoter of the gene encoding the cyclin-dependent kinase (CDK) inhibitor p21(WAF1/CIP1) and regulated the induction of p21 messenger RNA. IFN-gamma did not inhibit the growth of U3A cells, which are deficient in STAT1, but did inhibit the growth of U3A cells into which STAT1 alpha was reintroduced. Thus, STAT1 protein is essential for cell growth suppression in response to IFN-gamma. The STAT signaling pathway appears to negatively regulate the cell cycle by inducing CDK inhibitors in response to cytokines.