Accumulating evidence reveals the effectiveness of epigenetic therapy in gastric cancer. However, the molecular mechanisms and targets underlying such therapeutic responses remain elusive. Herein, we report an aberrant yet therapeutically rectifiable epigenetic signaling in gastric carcinogenesis. Administration of DNA-demethylating drug 5-aza-2'-deoxycytidine (5-aza-dC) reduced gastric cancer incidence by ~74% (P < 0.05) in N-nitroso-N-methylurea-treated mice. Through genome-wide methylation scanning, novel promoter hypermethylation-silenced and drug-targeted genes were identified in the resected murine stomach tumors and tissues. We uncovered that growth/differentiation factor 1 (Gdf1), a member of the transforming growth factor-β superfamily, was silenced by promoter hypermethylation in control tumor-bearing mice, but became reactivated in 5-aza-dC-treated mice (P < 0.05). In parallel, the downregulated SMAD2/3 phosphorylation in gastric cancer was revived by 5-aza-dC in vivo. Such hypermethylation-dependent silencing and 5-aza-dC-mediated reactivation of GDF1-SMAD2/3 activity was conserved in human gastric cancer cells (P < 0.05). Subsequent functional characterization further revealed the antiproliferative activity of GDF1, which was exerted through activation of SMAD2/3/4-mediated signaling, transcriptional controls on p15, p21 and c-Myc cell-cycle regulators and phosphorylation of retinoblastoma protein. Clinically, hypermethylation and loss of GDF1 was significantly associated with reduced phosphorylated-SMAD2/3 and poor survival in stomach cancer patients (P < 0.05). Taken together, we demonstrated a causal relationship between DNA methylation and a tumor-suppressive pathway in gastric cancer. Epigenetic silencing of GDF1 abrogates the growth-inhibitory SMAD signaling and renders proliferation advantage to gastric epithelial cells during carcinogenesis. This study lends support to epigenetic therapy for gastric cancer chemoprevention and identifies a potential biomarker for prognosis.