Protein tyrosine phosphatase receptor‑type O (PTPRO), a member of the PTP family, has been frequently reported as potential tumor suppressor in many types of cancer. However, the exact function of PTPRO in lung squamous cell carcinoma (LSCC) remains unclear. Bisulfite sequencing and methylation specific polymerase chain reaction (PCR) were used to identify the methylation status of PTPRO in LSCC cells, and quantitative methylation specific PCR was used to evaluate the methylation levels of PTPRO in LSCC patients. Stably expressing PTPRO vectors were constructed and transfected into H520 and SK‑MES‑1 cells, followed by MTT and colony formation assays, and analysis of tumor weight and volume in in vivo mouse xenograft models. The present study demonstrated that the CpG island of PTPRO exon 1 was obviously hypermethylated in LSCC cells and tissues. The mRNA expression of PTPRO could be restored by treatment with a demethylation agent. Increased methylation and decreased mRNA levels of PTPRO were observed in LSCC samples compared with adjacent healthy tissues, and were associated with poor prognosis of patients. The mRNA expression of PTPRO was negatively correlated with its methylation level in tumors. Functionally, ectopic PTPRO expression in LSCC cells significantly inhibited the proliferation rates, and colony formation, in comparison with control and non‑transfected cells. In vivo assays confirmed the inhibitory effect of PTPRO on LSCC cell growth. In conclusion, these data provided evidence that epigenetic regulation of PTPRO impairs its tumor suppressor role in LSCC, and restoration of PTPRO may be a potential therapeutic strategy.