Human leucine zipper transcription factor-like 1 (LZTFL1) is a novel gene with unknown biological functions. It is located in the chromosome region 3p21.3, a hotspot for tumor suppressor genes. To understand the biological functions of LZTFL1, we surveyed the expression level of LZTFL1 in tumor and normal samples in tissue microarrays and a clinical archive of 84 gastric cancer specimens using immunohistochemistry. We found that LZTFL1 is expressed highly in the epithelial cells of normal tissues and is significantly downregulated in the corresponding tumor samples. The expression level of LZTFL1 correlated significantly with the survival outcomes of the patients and had significant inverse correlation with tumor metastasis. Overexpression of LZTFL1 in tumor cells inhibited anchorage-independent cell growth and cell migration in vitro and repressed tumor growth in vivo. Furthermore, we show that LZTFL1 expression is upregulated on epithelial cell differentiation and is graded along the crypt-villus axis of the intestine, with weakest expression level in the proliferative zone of the crypt and highest expression level at the apex of the differentiation zone in the villus. Expression of LZTFL1 overlaps with that of E-cadherin at the plasma membrane. Our results indicate that LZTFL1 is a tumor suppressor and that loss of LZTFL1 expression has significant clinical outcomes. LZTFL1 expression may serve as an independent prognostic marker for survival outcome of gastric cancer patients. We propose that LZTFL1 may inhibit tumorigenesis by stabilizing E-cadherin-mediated adherens junction formation and promoting epithelial cell differentiation.