STAT5 is an essential transcription factor in hematopoiesis, which is activated through tyrosine phosphorylation in response to cytokine stimulation. Constitutive activation of STAT5 is a hallmark of myeloid and lymphoblastic leukemia. Using homology modeling and molecular dynamics simulations, a model of the STAT5 phosphotyrosine-SH2 domain interface was generated providing first structural information on the activated STAT5 dimer including a sequence, for which no structural information is available for any of the STAT proteins. We identified a novel intramolecular interaction mediated through F706, adjacent to the phosphotyrosine motif, and a unique hydrophobic interface on the surface of the SH2 domain. Analysis of corresponding STAT5 mutants revealed that this interaction is dispensable for Epo receptor-mediated phosphorylation of STAT5 but essential for dimer formation and subsequent nuclear accumulation. Moreover, the herein presented model clarifies molecular mechanisms of recently discovered leukemic STAT5 mutants and will help to guide future drug development.