In the adult liver, the Hippo pathway mammalian STE20-like protein kinases 1 and 2 and large tumor suppressor homologs 1 and 2 (LATS1/2) control activation of the transcriptional coactivators Yes-associated protein (YAP) and WW domain containing transcription regulator 1 (TAZ) in hepatocytes and biliary epithelial cells, thereby regulating liver cell proliferation, differentiation, and malignant transformation. Less is known about the contribution of Hippo signaling to liver development. We used conditional mutagenesis to show that the Hippo signaling pathway kinases LATS1 and LATS2 are redundantly required during mouse liver development to repress YAP and TAZ in both the biliary epithelial and hepatocyte lineages. In the absence of LATS1/2, biliary epithelial cells exhibit excess proliferation while hepatoblasts fail to mature into hepatocytes, defects that result in perinatal lethality. Using an in vitro hepatocyte differentiation assay, we demonstrate that YAP activity decreases and Hippo pathway kinase activities increase upon differentiation. In addition, we show that YAP activation in vitro, resulting from either depletion of its negative regulators LATS1/2 or expression of a mutant form of YAP that is less efficiently phosphorylated by LATS1/2, results in transcriptional suppression of genes that normally accompany hepatocyte maturation. Moreover, we provide evidence that YAP activity is repressed by Hippo pathway activation upon hepatocytic maturation in vitro. Finally, we examine the localization of YAP during fetal liver development and show that higher levels of YAP are found in biliary epithelial cells, while in hepatocytes YAP levels decrease with hepatocyte maturation. Conclusion: Hippo signaling, mediated by the LATS1 and LATS2 kinases, is required to restrict YAP and TAZ activation during both biliary and hepatocyte differentiation. These findings suggest that dynamic regulation of the Hippo signaling pathway plays an important role in differentiation and functional maturation of the liver. (Hepatology 2016;64:1757-1772).