Signal transducer and activator of transcription 3 (STAT3) has been proposed as a target for melanoma prevention. Luteolin, a bioactive flavonoid abundant in medicinal herbs, has been reported to have anti-melanoma activity in vitro. However, its in vivo anti-melanoma effects and underlying mechanisms have not been fully elucidated. In this study, ten cell lines and two mouse models (B16F10 allograft and A375 xenograft models) were used for assessing the in vitro and in vivo anti-melanoma effects of luteolin. A STAT3 over-activated stable A375 cell line was used to determine the contribution of STAT3 signaling in luteolin’s anti-melanoma effects. Results showed that luteolin dose-dependently reduced viability of melanoma cells. Luteolin also induced apoptosis in, and suppressed migration and invasion of, A375 and B16F10 melanoma cells. Mechanistically, luteolin inhibited phosphorylation of STAT3 and Src (an upstream kinase of STAT3), accelerated ubiquitin–proteasome pathway-mediated STAT3 degradation, and downregulated the expression of STAT3-targeted genes involved in cell survival and invasion in melanoma cells. Molecular modelling and surface plasmon resonance imaging showed that luteolin stably bound to the protein kinase domain of Src. Animal studies demonstrated that prophylactic administration of luteolin restrained melanoma growth and Src/STAT3 signaling in both A375 and B16F10 melanoma-bearing mice. Moreover, luteolin’s anti-melanoma effects were diminished by STAT3 over-activation in A375 cells. Our findings indicate that luteolin inhibits STAT3 signaling by suppressing STAT3 activation and promoting STAT3 protein degradation in melanoma cells, thereby exhibiting anti-melanoma effects. This study provides further pharmacological groundwork for developing luteolin as a chemopreventive agent against melanoma.