Growth arrest and DNA damage 45G (GADD45G), a stress sensor with multiple implications in various biological processes, is down-regulated in a broad spectrum of cancers. However, little is known about the biological effects of GADD45G on hepatocellular carcinoma (HCC) cells and the related mechanisms. In the present study, we found that GADD45G was commonly down-regulated in oncogene-transformed mouse liver cells and in human and mouse HCC. Ectopic expression of GADD45G robustly elicited senescence in HCC cells and suppressed tumor growth in vivo. Furthermore, GADD45G-induced senescence occurred in HCC cells independently of p53, p16INK4a (p16), and retinoblastoma (Rb). Instead, the prompt inhibition of Janus kinase 2 (Jak2), tyrosine kinase 2 (Tyk2), and signal transducer and activator of transcription 3 (Stat3) activation was observed in cells undergoing senescence. Impairment of Jak-Stat3 activation caused by GADD45G expression was associated with activation of SH2 domain-containing protein tyrosine phosphatase-2 (Shp2). Expression of constitutively activated Stat3 or human telomerase reverse transcriptase (hTERT), as well as knockdown of Shp2f, efficiently counteracted GADD45G-induced senescence. More important, in clinical HCC specimens, we found that GADD45G expression was inversely correlated with phosphorylated Stat3 expression in tumor cells and disease progression. Conclusion: GADD45G functions as a negative regulator of the Jak-Stat3 pathway and inhibits HCC by inducing cellular senescence. The decrease or absence of GADD45G expression may be a key event for tumor cells or premalignant liver cells to bypass cellular senescence. (Hepatology 2014;58:178–189)