Circular RNAs (circRNAs) have an important role in the development and progression of gastric cancer (GC). Hsa_circ_0063331 (circDDX17), a new circRNA shown to be considerably down-regulated in GC, was chosen for further study. The location of circDDX17 in GC cells was investigated using nuclear and cytoplasmic RNA fractionation and an RNA-FISH experiment. qRT-PCR was used to determine the expression levels of circDDX17, miR-1208, miR-1279, and FKBP5 in GC tissues. To investigate the functional mechanism of circDDX17 on the miR-1208/miR-1279/FKBP5 axis in GC cells, bioinformatics analysis, luciferase reporter, and IP were used. To investigate the role of circDDX17 and circDDX17-63aa in GC development, researchers used Transwell, wound healing, colony formation assays, CCK8, cell apoptosis tests, and Western blot. Finally, circDDX17 function in vivo was investigated using xenograft and metastatic mice models. We discovered that circDDX17 was down-regulated in GC tissues and cell lines in our investigation. CircDDX17 expression in GC patients was linked to tumor growth and lymph node metastasis. CircDDX17 decreased GC cell proliferation, migration, and epithelial-mesenchymal transition (EMT), while also promoting apoptosis in vitro and in vivo. CircDDX17 behaved as a sponge for miR-1208 and miR-1279, regulating FKBP5 expression in GC cells. FKBP5 interacts with ERK1/2 to control GC development through the ERK1/2 pathway. Furthermore, circDDX17 also encoded circDDX17-63aa, which inhibited GC cell proliferation, migration, and EMT. Finally, circDDX17 inhibits GC advancement via miR-1208/miR-1279/FKBP5 and encoded circDDX17-63aa to inhibit GC progression.