Even though embelin, an inhibitor of the XIAP, is known to exhibit anti-inflammatory and anti-cancer activities, very little is known about its mechanism of action. Here, we investigated whether embelin mediates its effect through interference with the signal transducer and activator of transcription 3 (STAT3) pathway. We found that embelin inhibited constitutive STAT3 activation in a variety of human cancer cell lines such as U266, DU-145, and SCC4 cells. The suppression of STAT3 was mediated through inhibition of the activation of JAK2 and c-Src. Pervanadate treatment also reversed the embelin-induced down-regulation of STAT3, suggesting the involvement of a protein tyrosine phosphatase. Indeed, we found that embelin-induced the expression of the tyrosine phosphatase PTEN and deletion of the PTEN gene by small interfering RNA abolished the ability of embelin to inhibit STAT3 activation. Besides, embelin failed to suppress STAT3 activation in PTEN-null PC3 cells, thus indicating that the inhibitory effect of embelin on STAT3 is PTEN-dependent. Embelin down-regulated the expression of STAT3-regulated gene products; this correlated with the suppression of cell proliferation and invasion, and the induction of apoptosis through the activation of caspase-3. Overall, our results indicate that the anti-inflammatory and anti-cancer activities previously assigned to embelin may be mediated in part through the suppression of the STAT3 pathway.