Purpose Long non-coding RNAs (lncRNAs) play important roles in the malignant behavior of cancer. HOTAIR, a well-studied lncRNA, contributes to breast cancer development, and overexpression of HOTAIR predicts a poor prognosis. However, the regulatory role of HOTAIR in the cancer stem-like cell (CSC) subpopulation remains largely unknown. Our goal was to determine the regulatory functions of HOTAIR in the processes of self-renewal capacity, tumor formation and proliferation of CSCs derived from breast cancer. Methods We first enriched and incubated the CSC population derived from breast cancer cell line MCF7 (CSC-MCF7) or MDA-MB-231 (MB231, CSC-MB231). Self-renewal capacity and tumor formation were assessed in vitro and in vivo to determine the stemness of CSCs. We assessed the impact on ectopically upregulated or downregulated expression of HOTAIR in CSCs by soft agar, self-renewal capacity and CCK-8 assays. The functional domain of HOTAIR was determined by truncation. RT-qPCR and semiquantitative Western blotting were performed to detect the expression levels of genes of interest. Chromatin IP (ChIP) was employed to detect the transcriptional regulatory activity of p53 on its target gene. Results After the identification of CSC properties, RT-qPCR analysis revealed that HOTAIR, but not other cancer-associated lncRNAs, is highly upregulated in both CSC-MCF7 and CSCMB231 populations compared with MCF7 and MB231 populations. By modulating the level of HOTAIR expression, we showed that HOTAIR tightly regulates the proliferation, colony formation, migration and self-renewal capacity of CSCs. Moreover, full-length HOTAIR transcriptionally inhibits miR-34a specifically, leading to upregulation of Sox2, which is targeted by miR-34a. Ectopic introduction of miR-34a mimics reverses the effects of HOTAIR on the physiological processes of CSCs, indicating that HOTAIR affects these processes, including self-renewal capacity; these effects are dependent on the regulation of Sox2 via miR-34a. Interestingly, tight transcriptional regulation of p53 by HOTAIR was found; accordingly, p21 is indirectly regulated by HOTAIR, resulting in cell cycle entry. Conclusion These results suggest that HOTAIR is a key regulator of proliferation, colony formation, invasion and self-renewal capacity in breast CSCs, which occurs in part through regulation of Sox2 and p53.