Stat3 and its isoforms belong to a family of cytoplasmic transcription factors that affect the synthesis of various proteins. Caspases are cysteinyl-aspartate proteases that function under apoptotic and non-apoptotic conditions. We now report that, in addition to transcriptional splicing, Stat3 fragmentation can be mediated by caspases. Caspase activation in DU145 cells was achieved by staurosporine (STS) exposure, and Western analysis revealed a reduction in full-length Stat3 (fl-Stat3) expression that was caspase-mediated. This proteolytic relationship was further studied by exposing purified Stat3 protein to a mixture of active caspases under cell-free conditions. This demonstrated that caspases directly cleaved Stat3 and Stat3 cleavage was accompanied by the apparent formation of cleavage fragment(s). Stat3 cleavage fragments, reflecting multiple caspase cleavage sites, also were observed in vitro following STS exposure in DU145 cells and in HEK293T cells transfected to express Stat3 truncation mutants. The impact of cleavage on Stat3 transcriptional activity next was assessed and revealed that cleavage of fl-Stat3 was accompanied by reductions in Stat3-DNA binding, Stat3-driven reporter protein (luciferase) activity, and the expression of selected Stat3-dependent genes. Further, reduced Stat3 expression correlated with increased sensitivity to apoptotic stimuli. In concomitant experiments, reporter activity was assessed in Stat3 truncation mutant-expressing HEK293T cells and revealed that, under non-apoptotic conditions, expression of different Stat3 fragments induced differential effects on Stat3-driven luciferase activity. These findings demonstrate that fl-Stat3 undergoes proteolytic processing by caspases that reduces its expression and leads to the formation of cleavage fragments that may modulate Stat3 transcriptional activity.