The mechanism by which Suppressor of Cytokine Signaling-3 (SOCS3) negatively regulates cytokine signaling has been widely investigated using over-expression studies in cell lines and is thought to involve interactions with both the gp130 receptor and JAK1. Here, we compare the endogenous JAK/STAT signaling pathway downstream of Leukemia Inhibitory Factor (LIF) signaling in wild type (WT) Embryonic Stem (ES) cells and in ES cells lacking either the entire Socs3 gene or bearing a truncated form of SOCS3 (SOCS3DeltaSB) lacking the C-terminal SOCS box motif (SOCS3(DeltaSB/DeltaSB)). In SOCS3(DeltaSB/DeltaSB) cells phosphorylated JAK1 accumulated at much higher levels than in WT cells or even cells lacking SOCS3 (SOCS3(-/-)). In contrast enhanced activation of STAT3 and SHP2 was seen in SOCS3(-/-) cells. Size exclusion chromatography of cell extracts showed that in unstimulated cells, JAK1 was exclusively associated with receptors but following cytokine stimulation hyperphosphorylated JAK1 (pJAK1) appeared to dissociate from the receptor complex in a manner independent of SOCS3. In WT and SOCS3(DeltaSB/DeltaSB) cells SOCS3 was associated with pJAK1. The data suggest that dissociation of activated JAK1 from the receptor results in separate targeting of JAK1 for proteasomal degradation through a mechanism dependent on the SOCS3 SOCS box thus preventing further activation of STAT3.