Hepatocyte growth factor (HGF) induces a three-phase response leading to the formation of branched tubular structures in epithelial cells. The HGF receptor tyrosine kinase works through a Src homology (SH2) docking site that can activate several signalling pathways. The first phase of the response (scattering), which results from cytoskeletal reorganization, loss of intercellular junctions and cell migration, is dependent on phosphatidylinositol-3-OH kinase and Rac activation. The second phase (growth) requires stimulation of the Ras-MAP kinase cascade. Here we show that the third phase (tubulogenesis) is dependent on the STAT pathway. HGF stimulates recruitment of Stat-3 to the receptor, tyrosined phosphorylation, nuclear translocation and binding to the specific promoter element SIE. Electroporation of a tyrosine-phosphorylated peptide, which interferes with both the associations of STAT to the receptor and STAT dimerization, inhibits tubule formation in vitro without affecting either HGF-induced 'scattering' or growth. The same result is obtained using a specific 'decoy' oligonucleotide that prevents STAT from binding to DNA and affecting the expression of genes involved in cell-cycle regulation (c-fos and waf-1). Activation of signal transducers that directly control transcription is therefore required for morphogenesis.