Sezary Syndrome (SzS) is a leukemic variant of cutaneous T-cell lymphoma characterized by the accumulation of clonal neoplastic CD4+ T cells. The signal transducers and activators of transcription (STAT) family members, Stat5a and Stat5b, play an important role in regulating T-cell activation. Recent studies have shown that inappropriate activation of STATs occurs frequently in a wide variety of human cancers. Here we examine the functional status of Stat5 proteins in SzS as compared with healthy donors. Western blotting demonstrates that in cytoplasmic extracts of unstimulated T cells from healthy controls two isoforms of Stat5, full-length and a COOH-terminal truncated isoform, termed Stat5_t, are present. However, bandshift assays demonstrate that only Stat5_t translocates to the nucleus and binds DNA on IL-2 stimulation. In contrast, preactivated T cells express only full-length Stat5, which is functionally activated on IL-2 stimulation. Analysis of Stat5 protein isoforms from five of five SzS patients revealed predominant aberrant expression of Stat5_t in preactivated peripheral blood mononuclear cell. Furthermore, patients showed preferential IL-2-induced DNA binding of Stat5_t. Consistent with the inappropriate activation of Stat5_t in SzS patients, real-time PCR revealed that IL-2-induced mRNA expression of the Stat5 target genes, Bcl-2, PIM-1, and CISH were markedly reduced. These data indicate that functional Stat5 isoform expression is regulated by T-cell activation status and that dysregulated expression of Stat5_t in malignant T cells in SzS can suppress Stat5-dependent gene expression. Thus, aberrant expression of Stat5_t may be one mechanism that contributes to the cellular transformation of T cells in this disease.