Yes-associated protein (YAP) is a potent transcription coactivator acting via binding to the TEAD transcription factor, and plays a critical role in organ size regulation. YAP is phosphorylated and inhibited by the Lats kinase, a key component of the Hippo tumor suppressor pathway. Elevated YAP protein levels and gene amplification have been implicated in human cancer. In this study, we report that YAP is inactivated during embryonic stem (ES) cell differentiation, as indicated by decreased protein levels and increased phosphorylation. Consistently, YAP is elevated during induced pluripotent stem (iPS) cell reprogramming. YAP knockdown leads to a loss of ES cell pluripotency, while ectopic expression of YAP prevents ES cell differentiation in vitro and maintains stem cell phenotypes even under differentiation conditions. Moreover, YAP binds directly to promoters of a large number of genes known to be important for stem cells and stimulates their expression. Our observations establish a critical role of YAP in maintaining stem cell pluripotency.