H1 depletion prevents STAT association with ectopic sites and enhances blood tumor formation induced by hyperactive JAK. Nucleosomes, H1, HP1, STAT, and JAK are represented by light-gray ovals, red rectangles, blue ovals, orange hexagons, and light-green rectangles, respectively. Hyperactive JAK is represented by an increased number of corresponding rectangles. (A) Top, in wild type chromatin, unphosphorylated STAT92E physically interacts with H1 and is recruited to ectopic loci irrespective of sequence-specific DNA recognition. The two proteins stabilize the association of HP1 with heterochromatin. Second, hyperactive JAK in hopTum-l larvae phosphorylates a greater fraction of STAT92E, which prevents its association with H1 and HP1 at ectopic sites and destabilizes HP1 association with pericentric heterochromatin. The excess of phosphorylated STAT92E abnormally stimulates downstream transcriptional targets and leads to blood tumor formation. Third, the association of STAT92E and HP1 with heterochromatin is dependent on the presence of H1. When H1 is depleted, both STAT92E and HP1 are dissociated from chromatin. Due to limiting activity of wild type JAK, the excess of STAT92E does not activate transcription and does not cause tumorigenesis. Bottom, depleting H1 in hopTum-l larvae leads to eviction of STAT92E from ectopic sites. The released STAT92E becomes available for phosphorylation by hyperactive JAK and enhances blood tumor formation. (B) Two independent pathways for H1-dependent heterochromatin formation. Arrows indicate physical interactions/tethering or an enzymatic reaction (H3K9 methylation). Phosphorylation by JAK prevents STAT accumulation at ectopic loci, including pericentric heterochromatin.