Microglia, the resident macrophage of the brain, mediates immune and inflammatory responses in the central nervous system (CNS). Activation of microglia and secretion of inflammatory cytokines associate with the pathogenesis of CNS diseases, including multiple sclerosis (MS), Alzheimer's disease (AD), Parkinson's disease, prion disease, and AIDS dementia. Microbial pathogens, cytokines, chemokines, and costimulatory molecules are potent inducers of microglial activation in the CNS. Signaling through its receptor, IL‐3 induces the activation of JAK‐STAT and MAP kinase pathways in microglial cells. In this study, we found that in vitro treatment of EOC‐20 microglial cells with tyrphostin AG490 blocked IL‐3‐induced tyrosine phosphorylation of JAK2, STAT5A, and STAT5B signaling proteins. Stable transfection of EOC‐20 cells with a dominant negative JAK2 mutant also blocked IL‐3‐induced tyrosine phosphorylation of JAK2, STAT5A, and STAT5B in microglia. The blockade of JAK2‐STAT5 pathway resulted in a decrease in IL‐3‐induced proliferation and expression of CD40 and major histocompatibility complex class II molecules in microglia. These findings highlight the fact that JAK2‐STAT5 signaling pathway plays a critical role in mediating IL‐3‐induced activation of microglia. © 2003 Wiley‐Liss, Inc.