Inconsistent results of SOX2 expression have been reported in gastric cancer (GC). Here, we demonstrated that SOX2 was progressively downregulated during GC development via immunochemistry in 755 human gastric specimens. Low SOX2 levels were associated with pathological stage and clinical outcome. Multivariate analysis indicated that SOX2 protein expression served as an independent prognostic marker for GC. Gain-and loss-of function studies showed the anti-proliferative, anti-metastatic, and pro-apoptotic effects of SOX2 in GC. PTEN was selected as SOX2 targets by cDNA microarray and ChIP-DSL, further identified by luciferase assays, EMSA and ChIP-PCR. PTEN upregulation in response to SOX2-enforced expression suppressed GC malignancy via regulating Akt dephosphorylation. PTEN inhibition reversed SOX2-induced anticancer effects. Moreover, concordant positivity of SOX2 and PTEN proteins in nontumorous tissues but lost in matched GC specimens predicted a worse patient prognosis. Thus, SOX2 proved to be a new marker for evaluating GC outcome.