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Mutations in the BCR-ABL1 kinase domain are an established mechanism of tyrosine kinase inhibitor (TKI) resistance in Philadelphia chromosome-positive leukemia, but fail to explain many cases of clinical TKI failure. In contrast, it is largely unknown why some patients fail TKI therapy despite continued suppression of BCR-ABL1 kinase activity, a situation termed BCR-ABL1 kinase-independent TKI resistance. Here, we identified activation of signal transducer and activator of transcription 3 (STAT3) by extrinsic or intrinsic mechanisms as an essential feature of BCR-ABL1 kinase-independent TKI resistance. By combining synthetic chemistry, in vitro reporter assays, and molecular dynamics-guided rational inhibitor design and high-throughput screening, we discovered BP-5-087, a potent and selective STAT3 SH2 domain inhibitor that reduces STAT3 phosphorylation and nuclear transactivation. Computational simulations, fluorescence polarization assays and hydrogen-deuterium exchange assays establish direct engagement of STAT3 by BP-5-087 and provide a high-resolution view of the STAT3 SH2 domain/BP-5-087 interface. In primary cells from chronic myeloid leukemia (CML) patients with BCR-ABL1 kinase-independent TKI resistance, BP-5-087 (1.0 μM) restored TKI sensitivity to therapy-resistant CML progenitor cells, including leukemic stem cells. Our findings implicate STAT3 as a critical signaling node in BCR-ABL1 kinase-independent TKI resistance, and suggest that BP-5-087 has clinical utility for treating malignancies characterized by STAT3 activation. [ABSTRACT FROM AUTHOR]