A transient inflammatory signal can initiate an epigenetic switch from nontransformed to cancer cells via a positive feedback loop involving NF-κB, Lin28, let-7, and IL-6. We identify differentially regulated microRNAs important for this switch and putative transcription factor binding sites in their promoters. STAT3, a transcription factor activated by IL-6, directly activates miR-21 and miR-181b-1. Remarkably, transient expression of either microRNA induces the epigenetic switch. MiR-21 and miR-181b-1, respectively, inhibit PTEN and CYLD tumor suppressors, leading to increased NF-κB activity required to maintain the transformed state. These STAT3-mediated regulatory circuits are required for the transformed state in diverse cell lines and tumor growth in xenografts, and their transcriptional signatures are observed in colon adenocarcinomas. Thus, STAT3 is not only a downstream target of IL-6 but, with miR-21, miR-181b-1, PTEN, and CYLD, is part of the positive feedback loop that underlies the epigenetic switch that links inflammation to cancer. ► Identification of differentially regulated microRNAs during transformation ► STAT3 activates miR-21 and miR-181b-1, which target PTEN and CYLD ► Transient expression of miR-21 or miR-181b-1 induces stable transformation ► STAT3-induced pathway in the epigenetic switch linking inflammation to cancer