Although STAT5A and STAT5B have some nonredundant functional properties, their distinct contributions to carcinogenesis are not clearly defined. Here we report that STAT5A expression is selectively inhibited by DNA methylation of the STAT5A gene promoter region in cells expressing the oncogenic tyrosine kinase NPM1-ALK (also known as NPM-ALK). The DNA methylation is induced by NPM1-ALK itself via STAT3, and is associated with binding to the promoter of the gene encoding MeCP2 capping protein and with lack of binding of the STAT5A gene transcription activator SP1. Reversal of methylation by the DNA methyltransferase inhibitor 5′-aza-2′-deoxycytidine restores SP1 binding and STAT5A gene expression. Notably, the induced or exogenously expressed STAT5A protein binds to the enhancer and intron 14 of the NPM1-ALK gene and triggers selective suppression of NPM1-ALK expression. These results show that NPM1-ALK induces epigenetic silencing of STAT5A gene and that STAT5A protein can act as a key tumor suppressor by reciprocally inhibiting expression of NPM1-ALK.