Autosomal recessive polycystic kidney disease (ARPKD) is caused by impaired function of fibrocystin/polyductin (FPC) in collecting duct epithelia, resulting in cyst formation. We hypothesized that the membrane-bound C-terminal FPC domain (FPCct) is necessary to suppress cystogenesis and facilitate epithelial homeostasis. In ARPKD, cystic kidney epithelia are characterized by a secretory phenotype associated with high intracellular cAMP levels and enhanced STAT3-dependent transcription. Moreover, impaired FPC function may lead to enhanced activation of Src tyrosine kinase, thereby activating STAT3 signaling and its downstream transcriptional activity. To investigate the effects of FPC loss on the cystic epithelial cell phenotype, we used an established principal-like MDCK cell line (pl-MDCK) and studied monolayers in both two- and three-dimensional culture. In this in vitro model of collecting duct epithelia, FPC-deficient cells showed twofold elevated basal cAMP levels and enhanced apical secretion leading to threefold higher luminal pressure. Forskolin-stimulated elevation of cAMP levels triggered enhanced Src-dependent activation of STAT3, resulting in a pronounced cystic phenotype. Notably, expression of wild-type FPCct reduced both STAT3-dependent transcription and the secretory phenotype in knockout epithelial cells. Our data suggest that FPCct interacts with Src kinase at the plasma membrane, thereby reducing Src-mediated STAT3 phosphorylation and limiting STAT3-dependent transcription. Thus, FPCct appears to act like a physiological suppressor of cystogenic signaling, as found in healthy kidney epithelia, which is essential for maintaining epithelial homeostasis. Protein constructs that restore FPC C-terminal function may offer a therapeutic lead to mitigate epithelial dysfunction and slow disease progression in ARPKD. NEW & NOTEWORTHY ARPKD is caused by impaired function of fibrocystin. We hypothesized that its C-terminal domain, FPCct, can suppress cystogenesis and uphold homeostasis. In epithelial spheroids of principal-like MDCK cells, high cAMP levels triggered Src-dependent activation of STAT3 inducing cystic phenotype. FPCct expressed in knockout epithelia, reduced both STAT3-dependent transcription and cystic phenotype, acting like a physiological suppressor of cystogenic signaling. FPCct may offer a therapeutic lead to mitigate epithelial dysfunction and slow disease progression in ARPKD.