Background: Aberrant JAK/STAT activation has been detected in many types of human cancers. The role of JAK/ STAT activation in cancer has been mostly attributed to direct transcriptional regulation of target genes by phosphorylated STAT (pSTAT), while the unphosphorylated STAT (uSTAT) is believed to be dormant and reside in the cytoplasm. However, several studies have shown that uSTATs can be found in the nucleus. In addition, it has been shown that tissue-specific loss of STAT3 or STAT5 in mice promotes cancer growth in certain tissues, and thus these STAT proteins can act as tumor suppressors. However, no unifying mechanism has been shown for the tumor suppressor function of STATs to date. We have previously demonstrated a non-canonical mode of JAK/STAT signaling for Drosophila STAT and human STAT5A, where a fraction of uSTAT is in the nucleus and associated with Heterochromatin Protein 1 (HP1); STAT activation (by phosphorylation) causes its dispersal, leading to HP1 delocalization and heterochromatin loss. Methods: We used a combination of imaging, cell biological assays, and mouse xenografts to investigate the role of STAT3 in lung cancer development. Results: We found that uSTAT3 has a function in promoting heterochromatin formation in lung cancer cells, suppressing cell proliferation in vitro, and suppressing tumor growth in mouse xenografts. Conclusions: Thus, uSTAT3 possesses noncanonical function in promoting heterochromatin formation, and the tumor suppressor function of STAT3 is likely attributable to the heterochromatin-promoting activity of uSTAT3 in the non-canonical JAK/STAT pathway.