Recently, our laboratory demonstrated that Stat3 is required for the de novo development of chemically-induced skin tumors. We have further investigated the role of Stat3 in epithelial carcinogenesis using mice in which the expression of a constitutively active/dimerized form of Stat3 (Stat3C) is targeted to the proliferative compartment of epidermis (referred to as K5.Stat3C transgenic mice). Keratinocytes from K5.Stat3C mice showed increased survival following exposure to 7,12-dimethylbenz[a]anthracene (DMBA) and enhanced proliferation following exposure to 12-O-tetradecanoylphorbol-13-acetate (TPA). In two-stage chemical carcinogenesis experiments using DMBA as the tumor initiator and TPA as the promoter, K5.Stat3C mice developed skin tumors with a shorter latency and in much greater number compared to non-transgenic littermates. Remarkably, 100% of the skin tumors that developed in K5.Stat3C transgenic mice bypassed the premalignant stage and were initially diagnosed as carcinoma in situ which rapidly progressed to squamous cell carcinoma (SCC). These tumors were highly vascularized, poorly differentiated and invasive and loss of expression of K10, filaggrin and E-cadherin was observed by 20 weeks. Finally, overexpression of Stat3C in a papilloma cell line led to enhanced cell migration and enhanced invasion through Matrigel in both the absence and presence of growth factors. In addition to its critical role in early stages of epithelial carcinogenesis, the current study reveals a novel role for Stat3 in driving malignant progression of skin tumors in vivo.