Cylindromatosis (CYLD), a deubiquitinase and regulator of microtubule dynamics, has important roles in the regulation of inflammation, immune response, apoptosis, mitosis, cell migration and tumorigenesis. Although great progress has been made in the biochemical and cellular functions of CYLD, its role in animal development remains elusive. In this study, we identified Drosophila CYLD (dCYLD) as a negative regulator of the Hippo pathway in vivo. dCYLD associates and colocalizes with Hpo, a core component of the Hippo pathway, in the cytoplasm, and decreases Hpo activity through limiting its phosphorylation at T195. We also showed that dCYLD limits Hippo signal transduction as evidenced by decreasing phosphorylation and thereby increasing activity of Yki, the key downstream effector of the Hippo pathway. These findings uncover dCYLD as a negative regulator of the Hippo pathway and provide new insights into the physiological function of dCYLD in animal development. (C) 2014 Elsevier Inc. All rights reserved.