Dictyostelium, the only known non-metazoan organism to employ SH2 domain:phosphotyrosine signaling, possesses STATs (signal transducers and activators of transcription) and protein kinases with orthodox SH2 domains. Here, however, we describe a novel Dictyostelium STAT containing a remarkably divergent SH2 domain. Dd-STATb displays a 15 amino acid insertion in its SH2 domain and the conserved and essential arginine residue, which interacts with phosphotyrosine in all other known SH2 domains, is substituted by leucine. Despite these abnormalities, Dd-STATb is biologically functional. It has a subtle role in growth, so that Dd-STATb-null cells are gradually lost from the population when they are co-cultured with parental cells, and microarray analysis identified several genes that are either underexpressed or overexpressed in the Dd-STATb null strain. The best characterised of these, discoidin 1, is a marker of the growth-development transition and it is overexpressed during growth and early development of Dd-STATb null cells. Dimerisation of STAT proteins occurs by mutual SH2 domain:phosphotyrosine interactions and dimerisation triggers STAT nuclear accumulation. Despite its aberrant SH2 domain, the Dd-STATb protein sediments at the size expected for a homodimer and it is constitutively enriched in the nucleus. Moreover, these properties are retained when the predicted site of tyrosine phosphorylation is substituted by phenylalanine. These observations suggest a non-canonical mode of activation of Dd-STATb that does not rely on orthodox SH2 domain:phosphotyrosine interactions.