The prognosis for individuals diagnosed with hepatocellular carcinoma (HCC) remains poor because of the high frequency of invasive tumor growth, intrahepatic spread, and extrahepatic metastasis. Here, we investigated the role of the standard isoform of CD44 (CD44s), a major adhesion molecule of the extracellular matrix and a cancer stem cell marker, in the TGF-β–mediated mesenchymal phenotype of HCC. We found that CD44s was the dominant form of CD44 mRNA expressed in HCC cells. Overexpression of CD44s promoted tumor invasiveness and increased the expression of vimentin, a mesenchymal marker, in HCC cells. Loss of CD44s abrogated these changes. Also in the setting of CD44s overexpression, treatment with TGF-β1 induced the mesenchymal phenotype of HCC cells, which was characterized by low E-cadherin and high vimentin expression. Loss of CD44s inhibited TGF-β–mediated vimentin expression, mesenchymal spindle-like morphology, and tumor invasiveness. Clinically, overexpression of CD44s was associated with low expression of E-cadherin, high expression of vimentin, a high percentage of phospho-Smad2–positive nuclei, and poor prognosis in HCC patients, including reduced disease-free and overall survival. Together, our findings suggest that CD44s plays a critical role in the TGF-β–mediated mesenchymal phenotype and therefore represents a potential therapeutic target for HCC. Cancer Res; 72(13); 3414–23. ©2012 AACR.