Collagen prolyl hydroxylases (P3H) are required for proper collagen biosynthesis. One of the family members P3H3 was downregulated in breast cancer and lymphoma due to DNA methylation. However the role of P3H3 in lung cancer has not yet been elucidated. In this study, we analyzed P3H3 expression in a panel of lung cancer cell lines and primary lung tumors. Epigenetic regulation was explored and the function of P3H3 was investigated by stable transfection and RNA interference. We found that P3H3 was downregulated in 6 out of 10 lung cancer cell lines. A heterogeneous methylation pattern of P3H3 was found in the exon region. In primary lung tumors, immunohistochemistry on tissue microarray (TMA) showed that higher expression of P3H3 was significantly associated with lower tumor N stage and grade (p = 0.035 and p = 0.026, respectively). Ectopic expression of P3H3 inhibited cell proliferation, colony formation, migration as well as invasion, and induced apoptosis together with cell cycle arrest in the G2/M phase. Knockdown of P3H3 led to increased migratory and invasive potential. These Phenomena are accompanied by enhanced p21, decreased cyclin A1 levels and increased caspase 3/7 activities. Taken together, we feel that P3H3 is a novel tumor suppressor and its protein expression is inversely related to lymph node metastasis and tumor differentiation in lung cancer.