Purpose: Here, we aim to investigate the molecular mechanism of regorafenib and verify the potential druggable target for the treatment of hepatocellular carcinoma (HCC).Experimental Design: HCC cell lines (PLC5, HepG2, Hep3B, SK-Hep1, and HA59T) were used to investigate the in vitro effect of regorafenib. Phosphatase activity was analyzed in HCC cells and purified SHP-1 proteins. PLC5-bearing mice were used to test the therapeutic efficiency of 20 and 40 mg/kg/d treatment with regorafenib (n ! 8 mice). The clinical relevance of STAT3 signaling was investigated with 142 tumor samples from different patients with HCC. Descriptive statistical analysis was used to compare the baseline characteristics of patients and the expression of p-STAT3.Results: Regorafenib inhibited STAT3-related signaling in a dose-dependent manner and was a more potent inhibitor of STAT3 than sorafenib. Regorafenib increased SHP-1 phosphatase activity in purified SHP-1 protein directly. N-SH2 domain deletion and D61A mutants mimicking open-form SHP-1 partially abolished regorafenib-induced STAT3 inhibition and apoptosis. Importantly, a higher level of expression of STAT3 was found in patients with advanced clinical stages (P ¼ 0.009) and poorly differentiated tumors (P ¼ 0.035).Conclusions: Regorafenib induced significant tumor inhibition by relieving the autoinhibited N-SH2 domain of SHP-1 directly and inhibiting p-STAT3 signals. STAT3 may be suitable as a prognostic marker of HCC development, and may be a druggable target for HCC-targeted therapy using regorafenib. Clin Cancer Res; 20(22); 5768-76. Ó2014 AACR.