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Purpose: Follistatin-related gene 3 (FSTL3), an established oncogene, can modulate target gene expression via members of the transforming growth factor β (TGF-β) superfamily. The present study was conducted to evaluate the expression of FSTL3 in gastric cancer (GC) and to determine its prognostic significance. We also evaluated the possible mechanisms involved in the oncogenic role of FSTL3 in gastric carcinogenesis and development. Methods: We obtained data from the Human Protein Atlas, MethSurv, cBioPortal, UALCAN, TIMER, GEPIA, STRING, GeneMANIA, ONCOMINE, and MEXPRESS databases and examined it using R software. RNAi was used to establish stable FSTL3-knockdown (shFSTL3) and overexpression (OE) cell strains. Western blot; enzyme-linked immunosorbent (ELISA); and immunohistochemical (ICH), immunofluorescence, and phalloidin staining were used for examining protein expression. Cell invasion and migration were determined using transwell and scratch-wound assays. After tumor-associated macrophage (TAM) generation, co-culturing of cancer cells with TAMs was performed to confirm the relationship between FSTL3 and TAMs. Results: In GC patients, FSTL3 mRNA and protein levels were upregulated. FSTL3 expression was significantly linked to cancer stage as well as to pathological tumor grade in GC. Moreover, a high expression of FSTL3 was associated with a dismal survival duration in patients with GC. Furthermore, functional enrichment analysis demonstrated that FSTL3 overexpression could activate epithelial–mesenchymal transition (EMT) by promoting F-actin expression and BMP/SMAD signaling. Finally, immunofluorescence staining confirmed that the overexpression of FSTL3 promoted the proliferation of M2 TAMs. Conclusion: Taken together, our findings suggest that FSTL3 may be involved in GC progression via the promotion of BMP/SMAD signaling-mediated EMT and M2 macrophage activation. [ABSTRACT FROM AUTHOR]