Chondromodulin-1 (ChM1) is a cartilage-specific glycoprotein that stimulates the growth of chondrocytes and inhibits the tube formation of endothelial cells. Endogenously, ChM1 is expressed in the cartilage and is an anti-angiogenic factor. ChM1 has been reported to suppress the proliferation of multiple human tumor cells in an anchorage-independent manner. However, the role of ChM1 in carcinogenesis of gastric cancer remains unknown. By quantitative RT-PCR and western blotting we examined the expression of ChM1 in gastric cancer tissue and normal gastric tissue. In vitro we investigated the functional and mechanistic roles of ChM1 in the inhibition of gastric cancer cell aggressiveness. We observed that ChM1 expression was remarkably downregulated in gastric cancer cell lines compared with the immortal normal gastric epithelial cell line GES-1. Importantly, ChM1 was frequently downregulated in gastric cancer tissue compared with normal gastric tissue. Low ChM1 mRNA expression was associated with higher clinical stages, higher lymph node metastasis, and poorer prognosis of patients. Functional assays in vitro showed that ectopic expression of ChM1 was able to inhibit gastric tumor cell proliferation by arresting the cell cycle. Overall, our findings indicate that ChM1 is a potential tumor suppressor in gastric cancer, suggesting that it may be useful as a biomarker for the treatment and prognosis of gastric cancer.