Here we report that epidermal keratinocytes in psoriatic lesions are characterized by activated Stat3. Transgenic mice with keratinocytes expressing a constitutively active Stat3 (K5.Stat3C mice) develop a skin phenotype either spontaneously, or in response to wounding, that closely resembles psoriasis. Keratinocytes from K5.Stat3C mice show upregulation of several molecules linked to the pathogenesis of psoriasis. In addition, the development of psoriatic lesions in K5.Stat3C mice requires cooperation between Stat3 activation in keratinocytes and activated T cells. Finally, abrogation of Stat3 function by a decoy oligonucleotide inhibits the onset and reverses established psoriatic lesions in K5.Stat3C mice. Thus, targeting Stat3 may be potentially therapeutic in the treatment of psoriasis.