Glia perform diverse and essential roles in the nervous system, but the mechanisms that regulate glial cell numbers are not well understood. Here, we identify and characterize a requirement for the Hippo pathway and its transcriptional co-activator Yorkie in controlling Drosophila glial proliferation. We find that Yorkie is both necessary for normal glial cell numbers and, when activated, sufficient to drive glial over-proliferation. Yorkie activity in glial cells is controlled by a Merlin-Hippo signaling pathway, whereas the upstream Hippo pathway regulators Fat, Expanded, Crumbs and Lethal giant larvae have no detectable role. We extend functional characterization of Merlin-Hippo signaling by showing that Merlin and Hippo can be physically linked by the Salvador tumor suppressor. Yorkie promotes expression of the microRNA gene bantam in glia, and bantam promotes expression of Myc, which is required for Yorkie and bantam-induced glial proliferation. Our results provide new insights into the control of glial growth, and establish glia as a model for Merlin-specific Hippo signaling. Moreover, as several of the genes we studied have been linked to human gliomas, our results suggest that this linkage could reflect their organization into a conserved pathway for the control of glial cell proliferation.