Background Recently, many potential prognostic biomarkers for gastric cancer (GC) have been identified, but the prognosis of advanced GC patients remains poor. Chloride channels are promising cancer biomarkers, and their family member chloride channel-3 (CLC-3) is involved in multiple biological behaviors. However, whether CLC-3 is a prognostic biomarker for GC patients is rarely reported. The molecular mechanisms by which CLC-3 is regulated in GC are unclear. Methods The expression of CLC-3 and XRCC5 in human specimens was analyzed using immunohistochemistry. The primary biological functions and pathways related to CLC-3 were enriched by RNA sequencing. A 5′-biotin-labeled DNA probe with a promoter region between − 248 and + 226 was synthesized to pull down CLC-3 promoter-binding proteins. Functional studies were detected by MTS, clone formation, wound scratch, transwell, and xenograft mice model. Mechanistic studies were investigated by streptavidin-agarose-mediated DNA pull-down, mass spectrometry, ChIP, dual-luciferase reporter assay system, Co-IP, and immunofluorescence. Results The results showed that CLC-3 was overexpressed in human GC tissues and that overexpression of CLC-3 was a poor prognostic biomarker for GC patients (P = 0.012). Furthermore, higher expression of CLC-3 was correlated with deeper tumor invasion (P = 0.006) and increased lymph node metastasis (P = 0.016), and knockdown of CLC-3 inhibited cell proliferation and migration in vitro. In addition, X-ray repair cross-complementing 5 (XRCC5) was identified as a CLC-3 promoter-binding protein, and both CLC-3 (HR 1.671; 95% CI 1.012–2.758; P = 0.045) and XRCC5 (HR 1.795; 95% CI 1.076–2.994; P = 0.025) were prognostic factors of overall survival in GC patients. The in vitro and in vivo results showed that the expression and function of CLC-3 were inhibited after XRCC5 knockdown, and the inhibition effects were rescued by CLC-3 overexpression. Meanwhile, the expression and function of CLC-3 were promoted after XRCC5 overexpression, and the promotion effects were reversed by the CLC-3 knockdown. The mechanistic study revealed that knockdown of XRCC5 suppressed the binding of XRCC5 to the CLC-3 promoter and subsequent promoter activity, thus regulating CLC-3 expression at the transcriptional level by interacting with PARP1. Conclusions Our findings indicate that overexpression of CLC-3 is regulated by XRCC5 and is a poor prognostic biomarker for gastric cancer. Double targeting CLC-3 and XRCC5 may provide the promising therapeutic potential for GC treatment. Electronic supplementary material The online version of this article (10.1186/s13045-018-0660-y) contains supplementary material, which is available to authorized users.