The IL-3 family of cytokines transduces signals through Stat5 and regulates myeloid development. Previous studies have determined that a carboxy terminally truncated isoform of Stat5 is activated in immature myeloid cells. This isoform, which lacks a transcriptional activation domain, is generated by a protein-processing event. To determine whether Stat5 cleavage plays an important role in the growth and maturation of myeloid progenitors, the FdCP1 model of myeloid maturation was evaluated. FdCP1 cells are IL-3–dependent myeloid progenitors that differentiate into monocytes when cultured in granulocyte macrophage–colony-stimulating factor (GM-CSF). Consistent with their immature phenotype, when FdCP1 cells are cultured in IL-3 they exhibit robust protease activity and signal through truncated Stat5 isoforms. In contrast, maturation leads to a loss of protease activity and a switch to the expression to full-length Stat5 isoforms. Introduction of a noncleavable, full-length Stat5 mutant into undifferentiated FdCP1 cells leads to a partially differentiated phenotype and prevents further differentiation in response to GM-CSF. These results support our hypothesis that Stat5 processing is important for myeloid maturation.