The TAZ transcription co-activator has been shown to promote cell proliferation and to induce epithelial-mesenchymal transition. Recently we have demonstrated that TAZ is phosphorylated and inhibited by the Hippo tumor suppressor pathway, which is altered in human cancer. The mechanism of TAZ-mediated transcription is unclear. We demonstrate here that TEAD is a key downstream transcription factor mediating the function of TAZ. Disruption of TEAD-TAZ binding or silencing of TEAD expression blocked the function of TAZ to promote cell proliferation and to induce epithelial-mesenchymal transition, demonstrating TEAD as a key downstream effector of TAZ. We also identified CTGF, a gene that regulates cell adhesion, proliferation, and migration, as a direct target of TAZ and TEAD. Our study establishes a functional partnership between TAZ and TEAD under negative regulation by the Hippo signaling pathway.