Signal Transducer and Activator of Transcription 3 (STAT3), a common oncogenic mediator, is constitutively activated in many types of human cancers; therefore it is a major focus in the development of novel anti-cancer agents. Hedyotis diffusa Willd has been used as a major component in several Chinese medicine formulas for the clinical treatment of colorectal cancer (CRC). However, the precise mechanism of its anti-tumor activity remains largely unclear. Using a CRC mouse xenograft model, in the present study we evaluated the effect of the ethanol extract of Hedyotis diffusa Willd (EEHDW) on tumor growth in vivo and investigated the underlying molecular mechanisms. We found that EEHDW reduced tumor volume and tumor weight, but had no effect on body weight gain in CRC mice, demonstrating that EEHDW can inhibit CRC growth in vivo without apparent adverse effect. In addition, EEHDW treatment suppressed STAT3 phosphorylation in tumor tissues, which in turn resulted in the promotion of cancer cell apoptosis and inhibition of proliferation. Moreover, EEHDW treatment altered the expression pattern of several important target genes of the STAT3 signaling pathway, i.e., decreased expression of Cyclin D1, CDK4 and Bcl-2 as well as up-regulated p21 and Bax. These results suggest that suppression of the STAT3 pathway might be one of the mechanisms by which EEHDW treats colorectal cancer.