Jak/STAT is an important signaling pathway mediating multiple events in development. We describe participation of metazoan co-activator SAYP/PHF10 in this pathway downstream of STAT. The latter, via its activation domain, interacts with the conserved core of SAYP. STAT is associated with the SAYP-containing co-activator complex BTFly and recruits BTFly onto genes. SAYP is necessary for stimulating STAT-driven transcription of numerous genes. Mutation of SAYP leads to maldevelopments similar to those observed in STAT mutants. Thus, SAYP is a novel co-activator mediating the action of STAT.