The cellular origin of gastric cancer remains elusive. Leucine-rich repeat-containing G-protein-coupled receptor 5 (Lgr5) is the first identified marker of gastric stem cells. However, the role of Lgr5(+) stem cells in driving malignant gastric cancer is not fully validated. Here, we deleted Smad4 and PTEN in murine gastric Lgr5(+) stem cells by the inducible Cre-LoxP system and marked mutant Lgr5(+) stem cells and their progeny with Cre-reporter Rosa26(tdTomato). Rapid onset and progression from microadenoma and macroscopic adenoma to invasive intestinal-type gastric cancer (IGC) were found in the gastric antrum with the loss of Smad4 and PTEN. In addition, invasive IGC developed at the murine gastro-forestomach junction, where a few Lgr5(+) stem cells reside. In contrast, Smad4 and PTEN deletions in differentiated cells, including antral parietal cells, pit cells and corpus Lgr5(+) chief cells, failed to initiate tumor growth. Furthermore, mutant Lgr5(+) cells were involved in IGC growth and progression. In the TCGA (The Cancer Genome Atlas) database, an increase in LGR5 expression was manifested in the human IGC that occurred at the gastric antrum and gastro-esophageal junction. In addition, the concurrent deletion of SMAD4 and PTEN, as well as their reduced expression and deregulated downstream pathways, were associated with human IGC. Thus, we demonstrated that gastric Lgr5(+) stem cells were cancer-initiating cells and might act as cancer-propagating cells to contribute to malignant progression.