The Hippo/Yap pathway is a well-conserved signaling cascade that regulates cell proliferation and differentiation to control organ size and stem/progenitor cell behavior. Following airway injury, Yap was dynamically regulated in regenerating airway epithelial cells. To determine the role of Hippo signaling in the lung, the mammalian Hippo kinases, Mst1 and Mst2, were deleted in epithelial cells of the embryonic and mature mouse lung. Mst1/2 deletion in the fetal lung enhanced proliferation and inhibited sacculation and epithelial cell differentiation. The transcriptional inhibition of cell proliferation and activation of differentiation during normal perinatal lung maturation were inversely regulated following embryonic Mst1/2 deletion. Ablation of Mst1/2 from bronchiolar epithelial cells in the adult lung caused airway hyperplasia and altered differentiation. Inhibitory Yap phosphorylation was decreased and Yap nuclear localization and transcriptional targets were increased after Mst1/2 deletion, consistent with canonical Hippo/Yap signaling. YAP potentiated cell proliferation and inhibited differentiation of human bronchial epithelial cells in vitro. Loss of Mst1/2 and expression of YAP regulated transcriptional targets controlling cell proliferation and differentiation, including Ajuba LIM protein. Ajuba was required for the effects of YAP on cell proliferation in vitro. Hippo/Yap signaling regulates Ajuba and controls proliferation and differentiation of lung epithelial progenitor cells.