TEL-JAK2 fusion proteins, which are a result of t(9;12)(p24;p13) translocations associated with human leukemia, activate Stat5 in vitro and in vivo and cause a myelo- and lymphoproliferative disease in a murine bone marrow transplant model. We report that Socs-1, a member of the SOCS family of endogenous inhibitors of JAKs and STATs, inhibits transformation of Ba/F3 cells by TEL-JAK2 but has no effect on Ba/F3 cells transformed by BCR-ABL, TEL-ABL, or TEL-platelet-derived growth factor receptor beta. TEL-JAK2, in addition to activating Stat5, associates with Shc and Grb2 and induces activation of Erk2, and expression of Socs-1 inhibits engagement of each of these signaling molecules. TEL-JAK2 kinase activity is inhibited by Socs-1, as assessed by in vitro kinase assays. In addition, Socs-1 induces proteasomal degradation of TEL-JAK2. Mutational analysis indicates that the SOCS box of Socs-1 is required for proteasomal degradation and for abrogation of growth of TEL-JAK2-transformed cells. Furthermore, murine bone marrow transplant assays demonstrate that expression of Socs-1 prolongs latency of TEL-JAK2-mediated disease in vivo. Collectively, these data indicate that Socs-1 inhibits TEL-JAK2 in vitro and in vivo through inhibition of kinase activity and induction of TEL-JAK2 protein degradation.