Background Gastric cancer (GC) is the third-leading cause of cancer-associated mortalities globally. The deregulation of circular RNAs (circRNAs) and microRNAs (miRNAs or miRs) is widely implicated in the pathogenesis and progression of different cancer types. Methods The expression profiling of circRNAs in GC is required to identify crucial circRNAs as biomarkers or therapeutic targets. In the present study, a published circRNA microarray dataset was used to identify differentially expressed circRNAs between GC tissues and normal gastric mucosa tissues. Reverse transcription-quantitative PCR was performed to validate the expression of circ_0001789. Fisher’s exact test, receiver operating characteristic curve and Kaplan-Meier plots were employed to analyze the clinical significance of circ_0001789. The miRNA targets of circ_0001789 were predicted using an online database, and their functional interaction was further confirmed by RNA pull-down, RNA immunoprecipitation and dual luciferase reporter assays. Transwell assays were conducted to investigate the biological functions of circ_0001789, miR-140-3p and p21 activated kinase 2 (PAK2) in the migration and invasion of GC cells. A xenograft mouse model was established to validate the role of circ_0001789 in the tumorigenesis of GC cells. Results circ_0001789 was identified as a highly expressed circRNA in GC tissues versus normal gastric mucosa tissues. Silencing circ_0001789 attenuated the malignancy of GC cells, and exosomal circ_0001789 was sufficient to regulate the malignant phenotype of GC cells. miR-140-3p was further identified as a downstream target of circ_0001789, which showed a negative correlation with circ_0001789 expression in GC tissues. Overexpression of miR-140-3p suppressed cell migration, invasion and epithelial-mesenchymal transition in GC cells. PAK2 was identified as the target of miR-140-3 to mediate the malignant phenotype of GC cells. Conclusion The present data suggested that the upregulation of circ_0001789 was associated with the progression of GC and with poor prognosis in patients with GC, and that miR-140-3p/PAK2 served as the downstream axis to mediate the oncogenic effect of circ_0001789.