The leukemia-associated TEL-Jak2 fusion protein possesses a constitutive tyrosine kinase activity and transforming properties in hematopoietic cell lines and animal models. In the murine pro-B Ba/F3 cell line, this fusion constitutively activates the Signal Transducer and Activator of Transcription 5 (Stat5) factors and, as a consequence, induces the sustained expression of various Stat5-target genes including the Cytokine Inducible SH2-containing protein (Cis) gene, which codes for a member of the Suppressor of Cytokine Signaling (Socs) protein family. In TEL-Jak2-transformed Ba/F3 cells, we also observed the upregulation of the Socs1 gene, whose product has been reported to negatively regulate the Jak kinase activity. In transient transfection experiments, Socs1 physically interacts with TEL-Jak2 and interferes with the TEL-Jak2-induced phosphorylation and activation of Stat5 factors, probably through the Socs1-induced proteasome-mediated degradation of the fusion protein. Interestingly, TEL-Jak2-expressing Ba/F3 cells were found to be resistant to the anti-proliferative activities of gamma interferon (IFN-gamma) seemingly as a consequence of Socs1 constitutive expression. These results indicate that the Socs1-dependent cytokine feedback loop, although active, is bypassed by the TEL-Jak2 fusion, but may play a role in the leukemogenic process by altering the cytokine responses of the leukemic cells. Our results also suggest that Socs1 plays a role in shutting down the signaling from the normally activated Jak2 kinase by inducing its proteasome-dependent degradation.