STAT (Signal transducer and activator of transcription) is a potent transcription factor and its aberrant activation by phosphorylation is associated with human cancers [1][2][3][4] . We have shown previously that overactivation of JAK, which phosphorylates STAT 5,6 , disrupts heterochromatin formation globally in Drosophila melanogaster 7 . However, it remains unclear how this effect is mediated and whether STAT is involved. Here, we demonstrate that Drosophila STAT (STAT92E) is involved in controlling heterochromatin protein 1 (HP1) distribution and heterochromatin stability. We found, unexpectedly, that loss of STAT92E, had the same effects as overactivation of JAK in disrupting heterochromatin formation and heterochromatic gene silencing, whereas overexpression of STAT92E had the opposite effects. We have further shown that the unphosphorylated or 'transcriptionally inactive' form of STAT92E is localized on heterochromatin in association with HP1, and is required for stabilizing HP1 localization and histone H3 Lys 9 methylation (H3mK9). However, activation by phosphorylation reduces heterochromatin-associated STAT92E, causing HP1 displacement and heterochromatin destabilization. Thus, reducing levels of unphosphorylated STAT92E, either by loss of STAT92E or increased phosphorylation, causes heterochromatin instability. These results suggest that activation of STAT by phosphorylation controls both access to chromatin and activity of the transcription machinery.To understand the molecular mechanism underlying JAK/STAT-mediated tumour formation, we have previously investigated the role of JAK in a Drosophila leukaemia model, in which a hyperactive mutant form of JAK (Tum-1) causes leukaemia-like overproliferation of blood cells 5,8 . We have demonstrated that oncogenic JAK disrupts heterochromatin formation globally, allowing transcriptional activation of genes that are not necessarily direct targets of STAT 7,9 . The molecular mechanism underlying the effects of Hopscotch (Hop, Drosophila JAK) on heterochromatin remains unclear. It may be mediated by phosphorylation of STAT92E, as in the canonical JAK/STAT pathway 10,11 . Alternatively, Hop may activate cellular targets other than STAT92E 9 .To investigate whether disruption of heterochromatin induced by Hop-activation 7 is mediated by STAT92E, we examined the effects of reducing stat92E + dosage on heterochromatic gene silencing, which can be measured by position-effect variegation (PEV) 12 We next examined the epistatic relationship between HP1 and STAT92E ( Fig. 1d-k). HP1, encoded by Su(var)205, is a constitutive component of heterochromatin and is essential for heterochromatic gene silencing 12,13 . Consistent with the results described above, we found that increasing stat92E + dosage by a chromosomal duplication (referred to as 3 × stat92E + , Fig. 1f) or a stat92E + transgene ( Supplementary Information, Fig. S1) enhanced heterochromatic gene silencing, resulting in complete silencing of the variegated white + gene. This effect was antagonized,...