Gastric cancer is the second most lethal cancer worldwide. Despite the current surgical and adjuvant therapies, 5-year survival remains less than 20-25% in the US, Europe and China. Therefore, there is an urgent need to identify new therapeutic targets for treating this malignant disease. Accumulating evidence has supported that aberrant activation of the Hedgehog signaling pathway plays a crucial role in tumorigenesis and progression of gastric cancer. Human sulfatase-1 (HSulf-1) is a recently identified enzyme that desulfates cell surface heparan sulfate proteoglycans (HSPGs), which is critical for Hedgehog signal transduction under a highly sulfated state. HSulf-1 has recently emerged as a tumor suppressor gene in certain types of cancer, including ovarian, breast, myeloma and hepatocellular carcinoma; however, its role in gastric cancer remains to be elucidated. Therefore, we established HSulf-1-expressing monoclonal MKN28 gastric cancer cells to investigate its function in gastric cancer. Expression of HSulf-1 significantly suppressed cellular proliferation and growth in MKN28 gastric cancer cells. Notably, HSulf-1 inhibits Gli-mediated transcription and down-regulates the expression of Hedgehog target genes, including GLI1, PTCH1/2, HHIP, CCND1, C-MYC and BCL-2. Collectively, the study provides evidence that HSulf-1 may function as a tumor suppressor in gastric cancer. It suppresses gastric cancer cell proliferation, possibly through abrogating the Hedgehog signaling pathway. The study provides new mechanistic insight into HSulf-1- mediated tumor suppression, and supports the use of HSulf-1 as a potential new therapeutic target in treating gastric cancer.