Proliferation and apoptosis must be precisely regulated to form organs with appropriate cell numbers and to avoid tumour growth. Here we show that Hippo (Hpo), the Drosophila homologue of the mammalian Ste20-like kinases, MST1/2, promotes proper termination of cell proliferation and stimulates apoptosis during development. hpo mutant tissues are larger than normal because mutant cells continue to proliferate beyond normal tissue size and are resistant to apoptotic stimuli that usually eliminate extra cells. Hpo negatively regulates expression of Cyclin E to restrict cell proliferation, downregulates the Drosophila inhibitor of apoptosis protein DIAP1, and induces the proapoptotic gene head involution defective (hid) to promote apoptosis. The mutant phenotypes of hpo are similar to those of warts (wts), which encodes a serine/threonine kinase of the myotonic dystrophy protein kinase family, and salvador (sav), which encodes a WW domain protein that binds to Wts. We find that Sav binds to a regulatory domain of Hpo that is essential for its function, indicating that Hpo acts together with Sav and Wts in a signalling module that coordinately regulates cell proliferation and apoptosis.