Accumulating evidence indicates that circular RNAs (circRNAs) are inextricably linked to cancer development. However, the function and mechanism of nucleus‐localized circRNAs in hepatocellular carcinoma (HCC) still require investigation. Here, qRT‐PCR and receiver‐operating characteristic curve were used to detect the expression and diagnostic potential of circSLC39A5 for HCC. The biological function of circSLC39A5 in HCC was investigated in vitro and in vivo. Nucleoplasmic separation assay, fluorescence in situ hybridization, RNA pulldown, RNA immunoprecipitation, the HDOCK Server, the NucleicNet Webserver, crosslinking‐immunoprecipitation, MG132 treatment, and chromatin immunoprecipitation were utilized to explore the potential molecular mechanism of circSLC39A5 in HCC. The results showed that circSLC39A5 was downregulated in both HCC tissues and plasma and was associated with satellite nodules and lymph node metastasis/vascular invasion. CircSLC39A5 was stably expressed in plasma samples under different storage conditions, showing good diagnostic potential for HCC (AUC = 0.915). CircSLC39A5 inhibited proliferation, migration, and invasion, facilitated the apoptosis of HCC cells, and was associated with low expression of Ki67 and CD34. Remarkably, circSLC39A5 is mainly localized in the nucleus and binds to the transcription factor signal transducer and activator of transcription 1 (STAT1), affecting its stabilization and expression. STAT1 binds to the promoter of thymine DNA glycosylase (TDG). Overexpression of circSLC39A5 elevates TDG expression and reverses the increase of proliferating cell nuclear antigen (PCNA) expression and the overactive cell proliferation caused by TDG silencing. Our findings uncovered a novel plasma circRNA, circSLC39A5, which may be a potential circulating diagnostic marker for HCC, and the mechanism by which nucleus‐localized circSLC39A5 exerts a transcriptional regulatory role in HCC by affecting STAT1/TDG/PCNA provides new insights into the mechanism of circRNAs.