Pentoxifylline (PTX), a phosphodiesterase inhibitor, has been shown to have anti-metastatic or anti-angiogenic activity against many human cancers. However, the underlying mechanisms are unknown. In this study, we report that, PTX at sub-toxic doses can inhibit melanoma tumor growth and angiogenesis by targeting the STAT3 signaling pathway. Despite minimal cytotoxicity against normal cells, PTX suppressed phosphorylation and DNA binding of STAT3 in a dose-dependent manner. Also, PTX inhibited phosphorylation of the upstream kinases JAK1 and JAK2 and increased the expression of pSHP2 phosphatase. Expression of various STAT3 regulated gene products, such as cylinD1, CDK6, cMyc, BclXL, and VEGF was downregulated following PTX treatment. Tumor microenvironment favours tumor growth and metastasis. PTX alters tumor microenvironment by limiting IL-6 secretion and also by disrupting VEGF–VEGFR2 autocrine/paracrine signaling. PTX treatment significantly inhibited tumor growth and angiogenesis in intra-dermal xenograft mouse model in vivo without having any visible toxicity. These findings identified STAT3 signaling as a target of PTX and have thus, augmented its potential application in the treatment of melanoma and other cancers.