Activation of the Jak/Stat pathway plays a central role in hematopoietic development. Here, we focus on unique functions for Stat3 in the development of the hematopoietic system. Recent studies highlight a critical role for Stat3 in the development of T helper cell and B cell subsets as well as dendritic cell development and maturation. Further, Stat3 appears to play an important function in limiting neutrophil numbers and in regulating hematopoietic stem cell self-renewal. In macrophages, Stat3 is essential in limiting TLR signaling and the inflammatory damage associated with classical macrophage activation. Stat3 also plays an essential role in leukemic development induced by viral oncogenes, chromosomal translocations and by the Friend erythroleukemia virus. We also discuss the mechanism by which Stat3 is activated by extracellular signals, and the current understanding of the role of post-translational modification in the regulation of Stat3 activity. Understanding the molecular events underlying Stat3 activation will be critical in generating targeted therapeutics aimed at modulating Stat3 function.