The Jak (Janus) family of nonreceptor tyrosine kinases plays a critical role in cytokine signal transduction pathways. In Drosophila melanogaster, the dominant hop(Tum-l) mutation in the Hop Jak kinase causes leukemia-like and other developmental defects. Previous studies have suggested that the Hop(Tum-l) protein might be a hyperactive kinase. Here, we report on the new dominant mutation hop(T42), which causes abnormalities that are similar to but more extreme than those caused by hop(Tum-l). We determined that Hop(T42) contains a glutamic acid-to-lysine substitution at amino acid residue 695 (E695K). This residue occurs in the JH2 (kinase-like) domain and is conserved among all Jak family members. We determined that Hop(Tum-1) and Hop(T42) both hyperphosphorylated and hyperactivated D-Stat when overexpressed in Drosophila cells. Moreover, we found that the hop(T42) phenotype was partially rescued by a reduction of wild-type D-stat activity. Finally, generation of the corresponding E695K mutation in murine Jak2 resulted in increased autophosphorylation and increased activation of Stat5 in COS cells. These results demonstrate that the mutant Hop proteins do indeed have increased tyrosine kinase activity, that the mutations hyperactivate the Hop-D-Stat pathway, and that Drosophila is a relevant system for the functional dissection of mammalian Jak-Stat pathways. Finally, we propose a model for the role of the Hop-D-Stat pathway in Drosophila hematopoiesis.