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Chronic inflammation is an important risk factor for the development of colorectal cancer; however, the mechanism of tumorigenesis especially tumor progression to malignancy in the inflamed colon is still unclear. Our study shows that epithelial signal transducer and activator of transcription 3 (STAT3), persistently activated in inflamed colon, is not required for inflammation-induced epithelial overproliferation and the development of early-stage tumors; however, it is essential for tumor progression to advanced malignancy. We found that one of the mechanisms that epithelial STAT3 regulates in tumor progression might be to modify leukocytic infiltration in the large intestine. Activation of epithelial STAT3 promotes the infiltration of the CD8+ lymphocyte population but inhibits the recruitment of regulatory T (Treg) lymphocytes. The loss of Stat3 in epithelial cells promoted the expression of cytokines/chemokines including CCL19, CCL28, and RANTES, which are known to be able to recruit Treg lymphocytes. Linked to these changes was the pathway mediated by sphingosine 1-phosphate receptor 1 and sphingosine 1-phosphate kinases, which is activated in colonic epithelial cells in inflamed colon with functional STAT3 but not in epithelial cells deleted of STAT3. Our data suggest that epithelial STAT3 plays a critical role in inflammation-induced tumor progression through regulation of leukocytic recruitment especially the infiltration of Treg cells in the large intestine.