The Hippo pathway is emerging as a key evolutionarily conserved signaling mechanism that controls organ size. Three membrane-associated proteins, Kibra, Merlin, and Expanded, regulate pathway activity, but the precise molecular mechanism by which they function is still poorly understood. Here we provide evidence that Merlin and Kibra activate Hippo signaling in parallel to Expanded at a spatially distinct cellular domain, the medial apical cortex. Merlin and Kibra together recruit the adapter protein Salvador, which in turn recruits the core kinase Hippo. In addition, we show that Crumbs has a dual effect on Hippo signaling. Crumbs promotes the ability of Expanded to activate the pathway but also sequesters Kibra to downregulate Hippo signaling. Together, our findings elucidate the mechanism of Hippo pathway activation by Merlin and Kibra, identify a subcellular domain for Hippo pathway regulation, and demonstrate differential activity of upstream regulators in different subcellular domains.