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Background Although the genetic spectrum of human colorectal cancer (CRC) is mainly characterized by APC, KRAS and TP53 mutations, driver genes in tumor initiation have not been conclusively demonstrated. In this study, we aimed to identify novel markers for CRC. Methods We performed exome analysis of sporadic colorectal cancer (sCRC) coding regions to screen loss of function (LoF) mutation genes, and carried out systems-level approaches to confirm top rank gene in this study. Results We identified loss of BMP5 is an early event in CRC. Deep sequencing identified BMP5 was mutated in 7.7% (8/104) of sCRC samples, with 37.5% truncating mutation frequency. Notably, BMP5 negative expression and its prognostic value is uniquely significant in sCRC but not in other tumor types. Furthermore, BMP5 expression was positively correlated with E-cadherin in CRC patients and its dysregulation play a vital role in epithelial-mesenchymal transition (EMT), thus triggering tumor initiation and development. RNA sequencing identified, independent of BMP/Smads pathway, BMP5 signaled though Jak-Stat pathways to inhibit the activation of oncogene EPSTI1. Conclusions Our result support a novel concept that the importance of BMP5 in sCRC. The tumor suppressor role of BMP5 highlights its crucial role in CRC initiation and development. Electronic supplementary material The online version of this article (10.1186/s12943-018-0925-7) contains supplementary material, which is available to authorized users.