Circular RNAs (circRNAs), often dysregulated in a variety of human diseases, participate in the initiation and development of cancers. Recently, circMTO1 (a circRNA derived from
MTO1
gene), identified as a tumor suppressor, has been shown to contribute to the suppression of hepatocellular carcinoma. The present study aimed to explore the clinical significance and roles of circMTO1 in liver fibrosis. Here, we found that serum circMTO1 was significantly down‐regulated in chronic hepatitis B (CHB) patients. Interestingly, serum circMTO1 was negatively correlated with fibrosis stages as well as HAI scores. Receiver operating characteristic curve analysis revealed that serum circMTO1 may serve as a diagnostic biomarker for liver fibrosis in CHB patients. Notably, overexpression of circMTO1 led to the suppression of transforming growth factor‐β1‐induced hepatic stellate cells (HSCs) activation. Bioinformatic analysis and luciferase activity assays indicated that circMTO1 was a target of mircoRNA‐17‐5p (miR‐17‐5p). Data from RNA pull‐down assay further confirmed that circMTO1 interacted with miR‐17‐5p. The inhibitory effects of circMTO1 on HSC activation were suppressed by miR‐17‐5p mimics. Further studies showed that Smad7 was a target of miR‐17‐5p. Moreover, circMTO1‐inhibited HSC activation was also blocked down by loss of Smad7. Taken together, we demonstrate that circMTO1 inhibits liver fibrosis via regulation of miR‐17‐5p and Smad7, and serum circMTO1 may be a novel promising biomarker of liver fibrosis.