Mammals express four highly conserved TEAD/TEF transcription factors that bind the same DNA sequence, but serve different functions during development. TEAD-2/TEF-4 protein purified from mouse cells was associated predominantly with a novel TEAD-binding domain at the amino terminus of YAP65, a powerful transcriptional coactivator. YAP65 interacted specifically with the carboxyl terminus of all four TEAD proteins. Both this interaction and sequence-specific DNA binding by TEAD were required for transcriptional activation in mouse cells. Expression of YAP in lymphocytic cells that normally do not support TEAD-dependent transcription (e.g., MPC11) resulted in up to 300-fold induction of TEAD activity. Conversely, TEAD overexpression squelched YAP activity. Therefore, the carboxy-terminal acidic activation domain in YAP is the transcriptional activation domain for TEAD transcription factors. However, whereas TEAD was concentrated in the nucleus, excess YAP65 accumulated in the cytoplasm as a complex with the cytoplasmic localization protein, 14-3-3. Because TEAD-dependent transcription was limited by YAP65, and YAP65 also binds Src/Yes protein tyrosine kinases, we propose that YAP65 regulates TEAD-dependent transcription in response to mitogenic signals.