Colorectal cancer (CRC) has become a major public health problem, ranking as the third most common type of cancer. Our previous study has revealed that TCF21 is frequently silenced by promoter hypermethylation in both CRC cell lines and primary CRC, with TCF21 methylation being significantly correlated with lymph node invasion. In this study, we further analyze the expression of TCF21 in CRC tissues and investigate the role of TCF21 in CRC in vitro and in vivo. We also explore the possible pathway regulated by TCF21. We thus demonstrate that decreased levels of TCF21 are associated with the pathological stage, clinical stage and lymph node metastasis, indicating a poor prognosis in CRC patients; overexpression of TCF21 inhibits cell proliferation, migration and invasion in the colorectal cell lines HCT116 and HT29. Furthermore, TCF21 functions as a tumor suppressor probably through inactivation of PI3K/AKT signaling and inhibition of MMPs. Our results suggest that enhancement of TCF21 levels may be a potential strategy to facilitate the prevention and treatment of CRC in the clinic.