Branching morphogenesis is a complex biological process common to the development of most epithelial organs. Here we demonstrate that NF2, LATS1/2 and YAP play a critical role in branching morphogenesis in the mouse kidney. Removal of Nf2 or Lats1/2 from the ureteric bud (UB) lineage causes loss of branching morphogenesis that is rescued by loss of one copy of Yap and Taz, and phenocopied by YAP overexpression. Mosaic analysis demonstrates that cells with high YAP expression have reduced contribution to UB tips, similar to Ret cells, and that YAP suppresses RET signalling and tip identity. Conversely, Yap/Taz UB-deletion leads to cyst-like branching and expansion of UB tip markers, suggesting a shift towards tip cell identity. Based on these data we propose that NF2 and the Hippo pathway locally repress YAP/TAZ activity in the UB to promote subsequent splitting of the tip to allow branching morphogenesis.