Trop‐2, a cell surface glycoprotein, contains both extracellular epidermal growth factor‐like and thyroglobulin type‐1 repeat domains. Low TROP2 expression was observed in lung adenocarcinoma tissues as compared with their normal counterparts. The lack of expression could be due to either the loss of heterozygosity (LOH) or hypermethylation of the CpG island DNA of TROP2 upstream promoter region as confirmed by bisulphite sequencing and methylation‐specific (MS) polymerase chain reaction (PCR). 5‐Aza‐2′‐deoxycytidine treatment on lung cancer cell (CL) lines, CL1‐5 and A549, reversed the hypermethylation status and elevated both TROP2 mRNA and protein expression levels. Enforced expression of TROP2 in the lung CL line H1299 reduced AKT as well as ERK activation and suppressed cell proliferation and colony formation. Conversely, silencing TROP2 with shRNA transfection in the less efficiently tumour‐forming cell line H322M enhanced AKT activation and increased tumour growth. Trop‐2 could attenuate IGF‐1R signalling‐mediated AKT/β‐catenin and ERK activation through a direct binding of IGF1. In conclusion, inactivation of TROP2 due to LOH or by DNA methylation may play an important role in lung cancer tumourigenicity through losing its suppressive effect on IGF‐1R signalling and tumour growth.