Activation of signal transducers and activators of transcription-3 (STAT-3) has been linked with survival, proliferation, chemoresistance, and angiogenesis of tumor cells, including human multiple myeloma (MM). Thus, agents that can suppress STAT3 activation have potential as cancer therapeutics. In our search for such agents, we identified acetyl-11-keto-beta-boswellic acid (AKBA), originally isolated from Boswellia serrata. Our results show that AKBA inhibited constitutive STAT3 activation in human MM cells. AKBA suppressed IL-6-induced STAT3 activation, and the inhibition was reversible. The phosphorylation of both Jak 2 and Src, constituents of the STAT3 pathway, was inhibited by AKBA. Interestingly, treatment of cells with pervanadate suppressed the effect of AKBA to inhibit the phosphorylation of STAT3, thus suggesting the involvement of a protein tyrosine phosphatase. We found that AKBA induced Src homology region 2 domain-containing phosphatase 1 (SHP-1), which may account for its role in dephosphorylation of STAT3. Moreover, deletion of the SHP-1 gene by small interfering RNA abolished the ability of AKBA to inhibit STAT3 activation. The inhibition of STAT3 activation by AKBA led to the suppression of gene products involved in proliferation (cyclin D1), survival (Bcl-2, Bcl-xL, and Mcl-1), and angiogenesis (VEGF). This effect correlated with the inhibition of proliferation and apoptosis in MM cells. Consistent with these results, overexpression of constitutive active STAT3 significantly reduced the AKBA-induced apoptosis. Overall, our results suggest that AKBA is a novel inhibitor of STAT3 activation and has potential in the treatment of cancer.