Background: DAXX is a transcription repressor that has been implicated in several types of cancers, but its role in the development of gastric cancer remains unknown. Methods: We analysed the expression of DAXX in 83 pairs of gastric cancer samples, including neoplastic and adjacent tissues, and correlated the expression levels with clinical stages. We also investigated the molecular mechanisms by which DAXX downregulation promotes cancer growth using both in vitro and in vivo models. Results: DAXX was downregulated in advanced gastric cancer samples. The expression of DAXX inversely correlates with that of cancer stem cell markers CD44 and Oct4 in gastric cancer lines. DAXX overexpression in gastric cancer cells inhibited migration, invasion and epithelial- mesenchymal transition (EMT). The inhibition of EMT was achieved through the repression of SNAI3, a key inducer of EMT, by recruiting HDAC-1 into the nucleus. Using a xenograft mouse model, we demonstrated that the MKN45 cells formed smaller tumours when DAXX was overexpressed. Wild-type AGS cells were not able to form tumours in nude mice, but in contrast, formed visible tumours when DAXX was silenced in the cells. Conclusion: We for the first time demonstrated that DAXX functions as a tumour suppressor in gastric cancer by inhibiting stem cell growth and EMT.