Inhibition of STAT phosphorylation is recognized as a viable therapeutic strategy for disrupting tumorigenesis. Constitutive STAT phosphorylation is found with high frequency in a number of primary tumor types, while non-cancer cells exhibit low basal activity, providing an exploitable therapeutic window. STAT activation involves phosphorylation of the SH2 domain by a number of tyrosine kinases followed by STAT dimerization and translocation to the nucleus. By blocking the cognate binding site, STAT SH2-domain inhibitors can impede kinase-mediated de novo STAT phosphorylation. Assessing for inhibitors of STAT phosphorylation has previously been conducted exclusively in cellulo using Western blot analysis. However, while providing useful in cellulo efficacy, it is not possible to conclude that inhibition is due to a direct blockade of STAT protein. Here we developed a functional assay that directly reports the blockade of phosphorylation as a result of inhibitor interaction with STAT proteins. We have optimized reaction conditions for the functional assay and validated the assay against known STAT5B ligands, including peptides and small molecule inhibitors. As part of the study, we have also identified several sites of STAT5B phosphorylation by Abl kinase. This assay will serve to delineate the functional mechanism of STAT binders in vitro and deconvolute the mechanism of phospho-STAT inhibition observed in Western blot analysis.