The stem cell factor SALL4 (Sal-like protein 4) plays important roles in the development and progression of cancer. SALL4 is critically involved in tumour growth, metastasis and therapy resistance. However, the underlying mechanisms responsible for the oncogenic roles of SALL4 have not been well characterized. In this study, we demonstrated that SALL4 knockdown by short hairpin RNA greatly inhibited the proliferation, migration and invasion of gastric cancer cells. We further confirmed the inhibitory effects of SALL4 knockdown on gastric cancer cells by using a tetracycline-inducible system. Mechanistically, SALL4 knockdown downregulated the expression of CD44. The results of luciferase assay and chromatin immunoprecipitation study showed that SALL4 bound to CD44 promoter region and transcriptionally activated CD44. The results of rescue study revealed that CD44 overexpression antagonized SALL4 knockdown-mediated inhibition of gastric cancer cell proliferation, migration, and invasion in vitro and gastric cancer growth in vivo. Collectively, our findings indicate that SALL4 promotes gastric cancer progression through directly activating CD44 expression, which suggests a novel mechanism for the oncogenic roles of SALL4 in gastric cancer and represents a new target for gastric cancer therapy.