Autosomal-dominant (AD) polycystic kidney disease (PKD) is a leading cause of renal failure in the United States, and currently lacks available treatment options to slow disease progression. Mutations in the gene coding for polycystin-1 (PC1) underlie the majority of cases but the function of PC1 has remained poorly understood. We have previously shown that PC1 regulates the transcriptional activity of signal transducer and activator of transcription-6 (STAT6). Here we show that STAT6 is aberrantly activated in cyst-lining cells in PKD mouse models. Activation of the STAT6 pathway leads to a positive feedback loop involving auto/paracrine signaling by IL13 and the IL4/13 receptor. The presence of IL13 in cyst fluid and the overexpression of IL4/13 receptor chains suggests a mechanism of sustained STAT6 activation in cysts. Genetic inactivation of STAT6 in a PKD mouse model leads to significant inhibition of proliferation and cyst growth and preservation of renal function. We show that the active metabolite of leflunomide, a drug approved for treatment of arthritis, inhibits STAT6 in renal epithelial cells. Treatment of PKD mice with this drug leads to amelioration of the renal cystic disease similar to genetic STAT6 inactivation. These results suggest STAT6 as a promising drug target for treatment of ADPKD.