Coordination between cell proliferation and cell death is essential to maintain homeostasis in multicellular organisms. In Drosophila, these two processes are regulated by a pathway involving the Ste20-like kinase Hippo (Hpo) and the NDR family kinase Warts (Wts; also called Lats). Hpo phosphorylates and activates Wts, which in turn, through unknown mechanisms, negatively regulates the transcription of cell-cycle and cell-death regulators such as cycE and diap1. Here we identify Yorkie (Yki), the Drosophila ortholog of the mammalian transcriptional coactivator yes-associated protein (YAP), as a missing link between Wts and transcriptional regulation. Yki is required for normal tissue growth and diap1 transcription and is phosphorylated and inactivated by Wts. Overexpression of yki phenocopies loss-of-function mutations of hpo or wts, including elevated transcription of cycE and diap1, increased proliferation, defective apoptosis, and tissue overgrowth. Thus, Yki is a critical target of the Wts/Lats protein kinase and a potential oncogene.