Etk (also called Bmx) is a member of the Btk tyrosine kinase family and is expressed in a variety of hematopoietic, epithelial, and endothelial cells. We have explored biological functions, regulators, and effectors of Etk. Coexpression of v-Src and Etk led to a transphosphorylation on tyrosine 566 of Etk and subsequent autophosphorylation. These events correlated with a substantial increase in the kinase activity of Etk. STAT3, which was previously shown to be activated by Etk, associated with Etk in vivo. To investigate whether Etk could mediate v-Src-induced activation of STAT3 and cell transformation, we overexpressed a dominant-negative mutant of Etk in an immortalized, untransformed rat liver epithelial cell line, WB, which contains endogenous Etk. Dominant-negative inactivation of Etk not only blocked v-Src-induced tyrosine phosphorylation and activation of STAT3 but also caused a great reduction in the transforming activity of v-Src. In NIH3T3 cells, although Etk did not itself induce transformation, it effectively enhanced the transforming ability of a partially active c-Src mutant (c-Src378G). Furthermore, Etk activated STAT3-mediated gene expression in synergy with this Src mutant. Our findings thus indicate that Etk is a critical mediator of Src-induced cell transformation and STAT3 activation. The role of STAT3 in Etk-mediated transformation was also examined. Expression of Etk in a human hepatoma cell line Hep3B resulted in a significant increase in its transforming ability, and this effect was abrogated by dominant-negative inhibition of STAT3. These data strongly suggest that Etk links Src to STAT3 activation. Furthermore, Src-Etk-STAT3 is an important pathway in cellular transformation.