Interleukin‐6 (IL‐6) induces either differentiation or growth of a variety of cells. Little is known about the molecular basis of this cellular decision. The family of signal transducer and activator of transcription (Stat) proteins are involved in signaling through a variety of cytokine and growth factor receptors, although their biological roles have not been established. To address whether Stat proteins play roles in IL‐6‐induced growth or differentiation, we introduced two types of mutant Stat3 acting in a dominant‐negative manner into M1 leukemic cells which respond to IL‐6 with growth arrest and terminal differentiation. We show that dominant‐negative forms of Stat3 inhibited both IL‐6‐induced growth arrest at G(0)/G1 and macrophage differentiation in the M1 transformants. Blocking of Stat activation resulted in inhibition of IL‐6‐induced repression of c‐myb and c‐myc. Furthermore, IL‐6 enhanced the growth of M1 cells primarily through shortening the length of the G1 period when Stat3 was suppressed. Thus IL‐6 generates both growth‐enhancing signals and growth arrest‐ and differentiation‐inducing signals at the same time. Stat3 may be a key molecule which determines the cellular decision from cell growth to differentiation in M1 cells.