STAT3 activation has been associated with survival, proliferation and invasion of various human cancers. Whether betulinic acid, a pentacyclic triterpene, can modulate the STAT3 pathway, was investigated in human multiple myeloma (MM) cells. We found that betulinic acid inhibited constitutive activation of STAT3, Src kinase, JAK1 and JAK2. Pervanadate reversed the betulinic acid-induced downregulation of STAT3 activation, suggesting the involvement of a protein tyrosine phosphatase (PTP). Furthermore, betulinic acid induced the expression of the PTP SHP-1 and silencing of the SHP-1 gene abolished the ability of betulinic acid to inhibit STAT3 activation and rescued betulinic acid-induced cell death. Betulinic acid also downregulated the expression of STAT3-regulated gene products such as bcl-xL, bcl-2, cyclin D1 and survivin. This correlated with an increase in apoptosis as indicated by an increase in the sub-G1 cell population and an increase in caspase-3-induced PARP cleavage. Consistent with these results, overexpression of constitutive active STAT3 significantly reduced the betulinic acid-induced apoptosis. Betulinic acid also enhanced the apoptosis induced by thalidomide (from 10 to 55%) and bortezomib (from 5 to 70%) in MM cells. Overall, our results suggest that betulinic acid downregulates STAT3 activation through upregulation of SHP-1, and this may have potential in sensitization of STAT3 overexpressing tumors to chemotherapeutic agents.