Half of human prostate cancers overexpress the transcription factor ERG. The in vivo consequences of ERG expression and the mechanisms by which ERG activity modulates prostate carcinogenesis remain poorly defined. We show that prostate-specific overexpression of ERG, at levels comparable to human prostate cancer, results in upregulation of the Hippo pathway target genes and age-dependent development of prostate tumors. We show that ERG binds to chromatin sites occupied by TEAD4, increases histone H3K9/14 acetylation at these sites and transactivates Hippo target genes. In human prostate cancer cells, ERG binds to the promoter of YAP1 and is required for promoter histone H3K9/14 acetylation and YAP1 expression. We found that while in normal mouse prostate YAP1 is prominantly nuclear in both basal and luminal epithelial cells, in normal human prostate YAP1 is present in basal but absent in luminal cells. In contrast, in human prostate cancer, YAP1 is upregulated in luminal cancer cells in a subset of the tumors. Expression of ERG in human prostate tumors correlates with the appearance of nuclear YAP1, which, in turn, strongly correlates with tumor recurrence. Futhermore, we demonstrate that genetic activation of YAP1 in mouse prostate epithelium is sufficient for the appearance of age-dependent prostate tumors with histological phenotypes that are similar to tumors caused by ERG upregulation. These results provide direct genetic evidence of a causal role for ERG in prostate cancer and reveal a previously unrecognized connection between ERG and the Hippo signaling pathway.