Circular RNAs (circRNAs) are involved in cancer progression. Nonetheless, the role and mechanism of circ_0040705 in hepatocellular carcinoma (HCC) are unclear. The aberrantly expressed circRNAs and microRNAs (miRNAs) in HCC tissues were screened by bioinformatics. Circ_0040705, miR‐557, SRY‐box transcription factor 2 (SOX2), E‐cadherin, and N‐cadherin expressions were determined using quantitative real‐time polymerase chain reaction (qRT‐PCR) or Western blot. Cell counting kit‐8 (CCK‐8), 5‐ethynyl‐2′‐deoxyuridine (EdU), and Transwell experiments were utilized to examine the changes in HCC cell growth, migration, and invasion after circ_0040475 was overexpressed or knocked down. Lung metastasis assay was used to validate the effects of circRNA_0040705 on the lung metastasis of HCC cells in vivo. Binding sequences between circ_0040705 and miR‐557 and between miR‐557 and SOX2 were verified using dual‐luciferase reporter gene experiments. The expression levels of circ_0040705 and SOX2 mRNA were markedly increased in HCC tissues, but miR‐557 expression was down‐regulated. Circ_0040705 overexpression enhanced the growth, migration, invasion, and the expressions of E‐cadherin and N‐cadherin of HCC cells and promoted lung metastasis in vivo, whereas circ_0040705 knockdown exerted the opposite effects in HCC cells. Circ_0040705 worked as a sponge for miR‐557 to down‐modulate miR‐557 expression, and miR‐557 could specifically down‐modulate SOX2 expression. Circ_0040705 facilitates HCC cell growth, migration, and invasion by down‐modulating miR‐557 expression and up‐modulating SOX2 expression.