The Hippo (Hpo) signaling pathway governs cell growth, proliferation, and apoptosis by controlling key regulatory genes that execute these processes; however, the transcription factor of the pathway has remained elusive. Here we provide evidence that the TEAD/TEF family transcription factor Scalloped (Sd) acts together with the coactivator Yorkie (Yki) to regulate Hpo pathway-responsive genes. Sd and Yki form a transcriptional complex whose activity is inhibited by Hpo signaling. Sd overexpression enhances, whereas its inactivation suppresses, tissue overgrowth caused by Yki overexpression or tumor suppressor mutations in the Hpo pathway. Inactivation of Sd diminishes Hpo target gene expression and reduces organ size, whereas a constitutively active Sd promotes tissue overgrowth. Sd promotes Yki nuclear localization, whereas Hpo signaling retains Yki in the cytoplasm by phosphorylating Yki at S168. Finally, Sd recruits Yki to the enhancer of the pathway-responsive gene diap1, suggesting that diap1 is a direct transcriptional target of the Hpo pathway.