Hematopoietic development is highly dependent upon cytokine/receptor initiated signaling pathways. Of those activated in hematopoietic cells, the Janus kinase (JAK)/signal transducer and activator of transcription (STAT) pathway plays a major role. This review focuses on the key role of STAT5 activation in hematopoietic stem cells and early hematopoietic progenitor cells of normal and leukemic hematopoiesis. In normal hematopoietic stem cells STAT5 is required for robust competitive repopulation and proliferative responses to early acting cytokines. Activation of STAT5 by many activated receptor tyrosine kinases as well as by JAK2 and JAK3 has also been associated with hematologic malignancies and can result in cytokine-independent cell expansion. The biology of STAT5 function and its potential cooperation with other signaling pathways has become a key area of focus in the new era of molecularly targeted therapeutics for hematologic malignancy. In particular, interactions with Grb2-associated binding protein (Gab2) have linked STAT5 with the phosphatidylinositol-3-kinase pathway and its downstream signaling. Missing is a full understanding of the structure-function relationship of STAT5 activation, including functional targets and cooperating partners required to differentiate normal vs. leukemic STAT5 activation. This review summarizes the latest understanding of leukemogenesis and pathophysiology associated with constitutive STAT5 activation in hematologic malignancies.