We have generated mice with a cell type-specific disruption of the Stat3 gene in macrophages and neutrophils. The mutant mice are highly susceptible to endotoxin shock with increased production of inflammatory cytokines such as TNF alpha, IL-1, IFN gamma, and IL-6. Endotoxin-induced production of inflammatory cytokines is augmented because the suppressive effects of IL-10 on inflammatory cytokine production from macrophages and neutrophils are completely abolished. The mice show a polarized immune response toward the Th1 type and develop chronic enterocolitis with age. Taken together, Stat3 plays a critical role in deactivation of macrophages and neutrophils mainly exerted by IL-10.