Given its catalytic activity to generate diacylglycerol and inositol 1,4,5-trisphosphate, phospholipase C (PLC) is implicated in promoting cell growth. However, we found that PLC-β3-deficient mice develop myeloproliferative disease, lymphoma, and other tumors. The mutant mice have increased numbers of hematopoietic stem cells with increased proliferative, survival, and myeloid-differentiative abilities. These properties are dependent on Stat5 and can be antagonized by the protein phosphatase SHP-1. Stat5-dependent cooperative transformation by active c-Myc and PLC-β3 deficiency was suggested in mouse lymphomas in PLC-β3 -/- and in Eμ-myc;PLC-β3 +/- mice and human Burkitt's lymphoma cells. The same mechanism for malignant transformation seems to be operative in other human lymphoid and myeloid malignancies. Thus, PLC-β3 is likely a tumor suppressor. © 2009 Elsevier Inc. All rights reserved.