Chimeric RET/PTC (rearranged in transformation/papillary thyroid carcinoma) oncoproteins are constitutively active tyrosine kinases found in thyroid papillary carcinoma and nonneoplastic Hashimoto's thyroiditis. Although several proteins have been identified to be substrates of RET/PTC kinases, the pathogenic roles played by RET/PTC in malignant and benign thyroid diseases and the molecular mechanisms that are involved are not fully understood. We found that RET/PTC expression phosphorylates the Y701 residue of STAT1, a type II interferon (IFN)-responsive protein. RET/PTC-mediated signal transducer and activator of transcription 1 (STAT1) phosphorylation requires RET/PTC kinase activity to be intact but other tyrosine kinases, such as Janus kinases or c-Src, are not involved. RET/PTC-induced STAT1 transcriptional activation was not inhibited by suppressor of cytokine signaling-1 or -3, or protein inhibitors of activated STAT3 [(protein inhibitor of activated STAT (PIAS3)], but PIAS1 strongly repressed the RET/PTC-induced transcriptional activity of STAT1. RET/PTC-induced STAT1 activation caused IFN regulatory factor-1 expression. We found that STAT1 and IFN regulatory factor-1 cooperated to significantly increase transcription from type IV IFN-gamma responsive promoters of class II transactivator genes. Significantly, cells stably expressing RET/PTC expressed class II transactivator and showed enhanced de novo membrane expression of major histocompatibility complex (MHC) class II proteins. Furthermore, RET/PTC1-bearing papillary thyroid carcinoma cells strongly expressed MHC class II (human leukocyte-associated antigen-DR alpha) genes, whereas the surrounding normal tissues did not. Thus, RET/PTC is able to phosphorylate and activate STAT1. This may lead to enhanced MHC class II expression, which may explain why the tissues surrounding RET/PTC-positive cancers are infiltrated with lymphocytes. Such immune response-promoting activity of RET/PTC may also relate to the development of Hashimoto's thyroiditis.