Introduction Myelodysplastic syndromes (MDS) are a group of heterogeneous bone marrow clonal diseases characterized by the abnormal differentiation and development of bone marrow cells. Src homology region 2 domain-containing phosphatase (SHP)-1 is an important tumor suppressor gene that regulates the signal transducer and activator of transcription (STAT) pathway. Methods Survival analysis was performed to evaluate the function of decitabine (5-Aza) in treating MDS patients with and without SHP-1 methylation. The effects of 5-Aza treatment on SHP-1 expression and methylation and STAT3 phosphorylation were investigated in MDS cells by methylation-specific PCR, reverse transcription PCR, and western blotting. Cell viability and apoptosis were similarly evaluated by MTT assay and flow cytometry. Results High-risk MDS patients showed significant SHP-1 hypermethylation compared with low-risk patients, and patients with no SHP-1 methylation had longer overall survival. SHP-1 expression was significantly increased at mRNA and protein levels following 5-Aza treatment, while the phosphorylation of STAT3 protein was significantly decreased. Apoptosis increased significantly in MDS cells treated with higher doses of 5-Aza while cell viability decreased significantly. Conclusion SHP-1 hypermethylation was associated with poor prognosis in HR patients with MDS, suggesting it could be used as a prognostic indicator.