PAX5-JAK2 has recently been identified as a novel recurrent fusion gene in B-cell precursor acute lymphoblastic leukemia, but the function of the encoded chimeric protein has not yet been characterized in detail. Herein we show that the PAX5-JAK2 chimera, which consists of the DNA-binding paired domain of PAX5 and the active kinase domain of JAK2, is a nuclear protein that has the ability to bind to wild-type PAX5 target loci. Moreover, our data provide compelling evidence that PAX5-JAK2 functions as a nuclear catalytically active kinase that autophosphorylates and in turn phosphorylates and activates downstream signal transducers and activators of transcription (STATs) in an apparently noncanonical mode. The chimeric protein also enables cytokine-independent growth of Ba/F3 cells and therefore possesses transforming potential. Importantly, the kinase activity of PAX5-JAK2 can be efficiently blocked by JAK2 inhibitors, rendering it a potential target for therapeutic intervention. Together, our data show that PAX5-JAK2 simultaneously deregulates the PAX5 downstream transcriptional program and activates the Janus kinase-STAT signaling cascade and thus, by interfering with these two important pathways, may promote leukemogenesis.