The accepted mechanism of STAT activation involves its phosphorylation by a ligand-activated tyrosine kinase, which induces STAT dimerisation and its nuclear entry. Now, though, Jeffrey Williams and colleagues reveal that STAT activation - an important regulator of gene expression - can be driven by phosphatase inhibition rather than just by kinase activation. In Dictyostelium, they report, the prestalk cell inducer DIF-1 activates STATc by inhibiting the protein tyrosine phosphatase PTP3 (see p. 1347). DIF-1 controls the differentiation of certain prestalk cells by inducing the nuclear localisation of STATc in these cells. The researchers show that PTP3 interacts directly with STATc and that its inhibition causes the constitutive tyrosine phosphorylation of STATc and its nuclear localisation throughout the developing slug. The treatment of developing Dictyostelium cells with DIF-1 or their exposure to hyper-osmotic shock (which also induces STATc nuclear localisation) reduces PTP3's activity; significantly, both treatments induce the serine-threonine phosphorylation of PTP3. Together, these results provide important new insights into STAT activation.