We conducted an RNA sequencing study to identify novel gene fusions in 80 discovery dataset tumors collected from young patients with diffuse gastric cancer (DGC). Twenty-five in-frame fusions are associated with DGC, three of which (CLDN18-ARHGAP26, CTNND1-ARHGAP26, and ANXA2-MYO9A) are recurrent in 384 DGCs based on RT-PCR. All three fusions contain a RhoGAP domain in their 3’ partner genes. Patients with one of these three fusions have a significantly worse prognosis than those without. Ectopic expression of CLDN18-ARHGAP26 promotes the migration and invasion capacities of DGC cells. Parallel targeted RNA sequencing analysis additionally identifies TACC2-PPAPDC1A as a recurrent and poor prognostic in-frame fusion. Overall, PPAPDC1A fusions and in-frame fusions containing a RhoGAP domain clearly define the aggressive subset (7.5%) of DGCs, and their prognostic impact is greater than, and independent of, chromosomal instability and CDH1 mutations. Our study may provide novel genomic insights guiding future strategies for managing DGCs.