Differentiation status significantly affects the properties of malignant glioma cells, with non-stem cells inducing tumor enlargement and stem-like cells driving tumor initiation and treatment resistance. It is not completely understood how the same protein can have a distinct role in these cell populations. Here, we report that four and a half LIM domain protein 3 (FHL3) has an inhibitory effect on proliferation in non-stem glioma cells and a non-proliferative effect in glioma stem cells (GSCs). In GSCs, we show that FHL3 interacts with the Smad2/3 protein complex at the SOX4 promoter region, inhibits SOX4 transcriptional activity by recruiting PPM1A phosphatase to Smad2/3, and then suppresses GSC tumor sphere formation and self-renewal in vitro and in vivo via downregulation of SOX2 expression. Altogether, these findings highlight the role of FHL3 as a stemness-suppressor in regulation of the Smad2/3-SOX4-SOX2 axis in glioma.