The IRX1 tumor suppressor gene is located on 5p15.33, a cancer susceptibility locus. Loss of heterozygosity of 5p15.33 in gastric cancer was identified in our previous work. In this study, we analyzed the molecular features and function of IRX1. We found that IRX1 expression was lost or reduced in gastric cancer. However, no mutations were identified in IRX1-encoding regions. IRX1 transcription was suppressed by hypermethylation, and the expression of IRX1 mRNA was partially restored in gastric cancer cells after 5-Aza-dC treatment. Restoring IRX1 expression in SGC-7901 and NCI-N87 gastric cancer cells inhibited growth, invasion and tumorigenesis in vitro and in vivo. We identified a number of target genes by global microarray analysis after IRX1 transfection combined with real-time PCR and chromatin immunoprecipitation assay. BDKRB2, an angiogenesis-related gene, HIST2H2BE and FGF7, cell proliferation and invasion-related genes, were identified as direct IRX1 target genes. The hypermethylation of IRX1 was not only detected in primary gastric cancer tissues but also in the peripheral blood of gastric cancer patients, suggesting IRX1 could potentially serve as a biomarker for gastric cancer.