Recently, DNA methylation and reduced expression of the suppressor of the cytokine signaling-3 (SOCS3) gene in human hepatocellular carcinoma (HCC) patients have been reported. However, the roles of SOCS3 in HCC development in vivo have not been clarified. Using RT-PCR analysis and Western blotting, we confirmed that SOCS3 expression was reduced in HCC patients. However, reduced expression of SOCS3 occurred not only in HCC but also in nontumor regions, and this reduction was stronger as the fibrosis grade increased. Furthermore, SOCS3 levels were inversely correlated with signal transducers and activators of transcription-3 (STAT3) activation as well as transforming growth factor (TGF)-beta1 levels in the non-HCC region. To define the molecular consequences of SOCS3 silencing/STAT3 hyperactivation and liver fibrosis, we examined liver-specific SOCS3-deficient mice. We demonstrated that SOCS3 deletion in the liver resulted in hyperactivation of STAT3 and promoted ConA- and chemical-induced liver fibrosis. The expression of TGF-beta1, a mediator of fibrosis, was enhanced by SOCS3 gene deletion, but suppressed by the overexpression of a dominant-negative STAT3 or SOCS3 both in vivo and in vitro. These data suggest that TGF-beta1 is a target gene of STAT3 and could be one of the mechanisms for enhanced fibrosis in SOCS3-deficient mice. Thus, our present study provides a novel role of SOCS3 and STAT3 in HCC development: in addition to the previously characterized oncogenic potentials, STAT3 enhances hepatic fibrosis through the upregulation of TGF-beta1 expression, and SOCS3 prevents this process.