PAX5-JAK2 has recently been identified as a novel recurrent fusion gene in B-cell precursor acute lymphoblastic leukemia (BCP-ALL) 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 nuclear catalytically active kinase that autophosphorylates and in turn phosphorylates and activates downstream STATs in an apparently non-canonical mode. The chimeric protein also enables cytokine-independent growth of Ba/F3 cells and, therefore, possessing 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 JAK-STAT signaling cascade, and thus, by interfering with these two important pathways, may promote leukemogenesis.