In the injured central nervous system (CNS), reactive astrocytes form a glial scar and are considered to be detrimental for axonal regeneration, but their function remains elusive. Here we show that reactive astrocytes have a crucial role in wound healing and functional recovery by using mice with a selective deletion of the protein signal transducer and activator of transcription 3 (Stat3) or the protein suppressor of cytokine signaling 3 (Socs3) under the control of the Nes promoter-enhancer (Nes-Stat3^−/−, Nes-Socs3^−/−). Reactive astrocytes in Nes-Stat3^−/− mice showed limited migration and resulted in markedly widespread infiltration of inflammatory cells, neural disruption and demyelination with severe motor deficits after contusive spinal cord injury (SCI). On the contrary, we observed rapid migration of reactive astrocytes to seclude inflammatory cells, enhanced contraction of lesion area and notable improvement in functional recovery in Nes-Socs3^−/− mice. These results suggest that Stat3 is a key regulator of reactive astrocytes in the healing process after SCI, providing a potential target for intervention in the treatment of CNS injury.