Background Extracellular vesicles (EVs) are emerging mediators of intercellular communication that have been shown to play important roles in tumor progression. YRNA fragments, a type of small non-coding RNA, are dysregulated in non-small cell lung cancer (NSCLC) cell-derived EVs, suggesting that they may be an effective biomarker for cancer diagnosis and treatment strategies. Methods Differentially expressed YRNA hY4 fragments (hY4F) in EVs from NSCLC cells and normal lung fibroblasts were isolated by differential ultra-centrifugation. RNA-binding proteins that interacted with hY4F were identified by screening with an RNA pulldown assay and mass spectrometry. The molecular mechanism of hY4F and the RNA-binding protein Y box binding protein 1 (YBX1) was demonstrated by qRT-PCR, western blot, RNA pulldown, and rescue experiments. Transcriptome sequencing, qRT-PCR validation, bioinformatics analysis and NF-kappa B pathway inhibitor assays elucidate the mechanism of YBX1 and hY4F inhibiting lung cancer. A peptide pulldown assay was performed to screen and identify a potential methyltransferase for YBX1. The roles of hY4F, YBX1, and SET domain containing 3 in biological functions, such as proliferation, migration, invasion, and apoptosis, in lung cancer cells were also examined by EdU incorporation assay, Transwell assay, flow cytometry, and other methods. Lastly, a mouse xenograft assay was used to assess the clinical relevance of YBX1 and hY4F in vivo. Results Our data demonstrate that hY4 RNA fragments were upregulated in lung cancer- derived EVs, hY4F inhibits tumor progression through downregulating MAPK/NF-kappa B signaling, and then the selective sorting and secretion of hY4F into lung cancer EVs is regulated by the RNA-binding protein YBX1. Furthermore, we identified lysine K264 within the YBX1 C-terminal domain as the necessary site for its interaction with hY4Fs. K264 is modified by methylation, which affects its binding to hY4F and subsequent selective sorting into EVs in lung cancer cells. Conclusion Our findings demonstrate that hY4F acts as a tumor suppressor and is selectively sorted into lung cancer cell-derived EVs by interacting with methylated YBX1, which in turn promotes lung cancer progression. hY4F is a promising circulating biomarker for non-small cell lung cancer diagnosis and prognosis and an exceptional candidate for further therapeutic exploration.