The long non-coding RNA HOTAIR has been reported to be a poor prognostic biomarker in a variety of malignant tumors. However, little is known about the association of HOTAIR with gastric cancer. We examined the expression of HOTAIR in 68 gastric cancer samples using quantitative real-time RT-PCR and analyzed its correlation with the clinical parameters. The functional role of HOTAIR was examined by generating human gastric cancer cell lines with increased or suppressed HOTAIR expression. The anchorage -independent growth was assessed by soft agar assay. The increased or suppressed HOTAIR expressing gastric cancer cells were injected into the tail vein or peritoneal cavity of immunodeficient mice to examine the effect of this molecule on metastasis and peritoneal dissemination. The expression of HOTAIR was significantly higher in cancer lesions than in adjacent non-cancerous tissues in human gastric cancers. In the diffuse type of gastric cancer, the High-HOTAIR group (HOTAIR/GAPDH > 1) showed significantly more venous invasion, frequent lymph node metastases and a lower overall survival rate compared to the Low-HOTAIR group (HOTAIR/GAPDH < 1). Colony formation on the soft agar was enhanced in a HOTAIR-dependent manner. HOTAIR-expressing MKN74 formed more liver metastasis compared to control when they were injected into the tail vein of mice. In addition, reduced expression of HOTAIR in KATO III suppressed peritoneal dissemination. These results suggest that HOTAIR plays a pivotal role in the development of gastric cancer.