The Hippo pathway plays a major role in organ size control, and its dysregulation contributes to tumorigenesis. The major downstream effectors of the Hippo pathway are the YAP/TAZ transcription co-activators, which are phosphorylated and inhibited by the Hippo pathway kinase LATS1/2. Here, we report a novel mechanism of TAZ regulation by the tight junction protein PARD3. PARD3 promotes the interaction between PP1A and LATS1 to induce LATS1 dephosphorylation and inactivation, therefore leading to dephosphorylation and activation of TAZ. The cytoplasmic, but not the tight junction complex associated, PARD3 is responsible for TAZ regulation. Our study indicates a potential molecular basis for cell growth-promoting function of PARD3 by modulating the Hippo pathway signaling in response to cell contact and cell polarity signals.