Signal transducer and activator of transcription 3 (Stat3), a target for anticancer drug design, is activated by recruitment to phosphotyrosine residues on growth factor and cytokine receptors via its SH2 domain. We report here structure-activity relationship studies on phosphopeptide mimics targeted to the SH2 domain of Stat3. Inclusion of a methyl group on the β-position of the pTyr mimic 4-phosphocinnamide enhanced affinity 2- to 3-fold. Bis-pivaloyloxymethyl prodrugs containing β-methylcinnamide, dipeptide scaffolds Haic and Nle-cis-3,4-methanoproline, and glutamine surrogates were highly potent, completely inhibiting phosphorylation of Stat3 Tyr705 at 0.5-1 μM in a variety of cancer cell lines. The inhibitors were selective for Stat3 over Stat1, Stat5, Src, and p85 of PI3K, indicating ability to discriminate individual SH2 domains in intact cells. At concentrations that completely inhibited Stat3 phosphorylation, the prodrugs were not cytotoxic to a panel of tumor cells, thereby showing clear distinction between cytotoxicity and effects downstream of activated Stat3.