Mutations in polycystin-1 (PC1) lead to autosomal-dominant polycystic kidney disease (ADPKD), a leading cause of renal failure for which no treatment is available. PC1 is an integral membrane protein, which has been implicated in the regulation of multiple signaling pathways including the JAK/STAT pathway. Here we show that membrane-anchored PC1 activates STAT3 in a JAK2-dependent manner, leading to tyrosine phosphorylation and transcriptional activity. The C-terminal cytoplasmic tail of PC1 can undergo proteolytic cleavage and nuclear translocation. Tail-cleavage abolishes the ability of PC1 to directly activate STAT3 but the cleaved PC1 tail now coactivates STAT3 in a mechanism requiring STAT phosphorylation by cytokines or growth factors. This leads to an exaggerated cytokine response. Hence, PC1 can regulate STAT activity by a dual mechanism. In ADPKD kidneys PC1 tail fragments are overexpressed, including a unique ∼15-kDa fragment (P15). STAT3 is strongly activated in cyst-lining epithelial cells in human ADPKD, and orthologous and nonorthologous polycystic mouse models. STAT3 is also activated in developing, postnatal kidneys but inactivated in adult kidneys. These results indicate that STAT3 signaling is regulated by PC1 and is a driving factor for renal epithelial proliferation during normal renal development and during cyst growth.A utosomal-dominant polycystic kidney disease (ADPKD) is a common life-threatening genetic disease and leading cause of renal failure (1-4). Epithelial-lined cysts develop due to excessive proliferation leading to renal enlargement and destruction of functional renal tissue. No treatment is available to slow disease progression. PKD1 gene mutations cause the majority of cases but the exact function of its gene product, polycystin-1 (PC1), has remained poorly understood. Confusing the issue is the fact that both loss of PC1 as well as PC1 overexpression lead to renal cyst growth in mouse models. Furthermore, in human ADPKD, each clonal cyst within the same patient is thought to exhibit a unique combination of germline and acquired mutations that results in a cyst-by-cyst mosaic of genotypes and resulting variation of expression levels of PC1 harboring various mutations. PC1 has also been implicated in a puzzling variety of intracellular signaling events including JAK-STAT signaling (5, 6) and it has been difficult to elucidate which of these functions may be most important for renal cyst growth in ADPKD.Disruption of primary cilia in kidney epithelial cells leads to proliferation and cyst growth (7). PC1 has been shown to function in ciliary mechanotransduction, and a potential molecular mechanism emerged from the discovery that PC1 undergoes proteolytic cleavage, releasing the C-terminal cytoplasmic tail (∼30 kDa) from the membrane, followed by nuclear translocation (2, 5). PC1 cleavage is triggered upon the cessation of luminal fluid flow (2). The cleaved PC1 tail interacts with the transcription factors STAT6 and P100, enhances STAT6 activity, and STAT6 translocates between ...