Circular RNAs (circRNAs) are a new type of non-coding RNAs and their functions in gastric cancer (GC) remain unclear. Recent studies have revealed that circRNAs play an important role in cancer development and certain types of pathological responses, acting as microRNA (miRNA) sponges to regulate gene expression. CircNet was used to screen potential circRNAs and validated circYAP1 expression levels in 17 GC tissues by quantitative real-time PCR (qRT-PCR) and another 80 paired GC tissues by FISH. CircYAP1 overexpression and knockdown experiments were conducted to assess the effects of circYAP1 in vitro and in vivo, and its molecular mechanism was demonstrated by RNA in vivo precipitation assays, western blotting, luciferase assay and rescue experiments. CircYAP1 expression level was significantly lower in GC tissues than the adjacent normal tissues, and GC patients with circYAP1 low expression had shorter survival times as compared with those with circYAP1 high expression. Functionally, circYAP1 overexpression inhibited cell growth and invasion in vitro and in vivo, but its knockdown reversed these effects. Further analysis showed that circYAP1 sponged miR-367-5p to inhibit p27 Kip1 expression and GC progression. Our findings demonstrate that circYAP1 functions as a tumor suppressor in GC cells by targeting the miR-367-5p/p27 Kip1 axis and may provide a prognostic indicator of survival in GC patients.