IL-37 has been characterized as a fundamental inhibitor of innate immunity and a tumor suppressor in several cancers. However, the molecular mechanism of IL-37 in hepatocellular carcinoma (HCC) is largely unclear. In this study we found IL-37 expression was down-regulated in human HCC tissues and cell lines, and was negatively correlated with tumor size, vascular invasion, as well as overall-survial and disease-free survival (OS and DFS) of HCC. Multivariate Cox analysis revealed that IL-37 was an independent prognostic indicator for OS and DFS in HCC. Functional studies further showed that IL-37 overexpression significantly suppressed tumor growth by confining HCC to G2/M cell cycle arrest in vitro and in vivo. Mechanistically, we determined that IL-37 promoted Smad3 phospho-isoform signaling conversion from JNK/pSmad3L/c-Myc oncogenic signaling to pSmad3C/p21 tumor-suppressive signaling. Consistently, we detected a significant negative correlation between IL-37 expression and pSmad3L levels in a cohort of HCC biopsies; and the expression of pSmad3L predicted poorer outcome. These data highlight the importance of IL-37 in the cell proliferation and progression of HCC, and suggests that IL-37 may be a valuable biomarker for HCC prognosis.