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 (CCl₄), and histological analyses revealed liver fibrosis and tumors. Transforming growth factor (TGF)–β levels and STAT3 activity were elevated in liver tissue from STAT5-LKO mice upon CCl₄ treatment. To define the molecular link between STAT5 silencing and TGF-β up-regulation, as well as STAT3 activation, we examined STAT5-null mouse embryonic fibroblasts and primary hepatocytes. These cells displayed elevated TGF-β protein levels, whereas messenger RNA levels remained almost unchanged. Protease inhibitor studies revealed that STAT5 deficiency enhanced the stability of mature TGF-β. Immunoprecipitation and immunohistochemistry analyses demonstrated that STAT5, through its N-terminal sequences, could bind to TGF-β and that retroviral-mediated overexpression of STAT5 decreased TGF-β 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-ΔN) with CCl₄. STAT5-ΔN mice developed CCl₄-induced liver fibrosis but no tumors. In conclusion, loss of STAT5 results in elevated TGF-β levels and enhanced growth hormone–induced STAT3 activity. We propose that a deregulated STAT5–TGF-β–STAT3 network contributes to the development of chronic liver disease.