The control of cell number during animal development is a longstanding puzzle. Recent studies in the fruit fly Drosophila melanogaster have defined a new signaling pathway that restricts cell proliferation in differentiating epithelia. The cytoskeletal proteins Merlin and Expanded, which play a role in cell adhesion and structure, control the activation of the Hippo/Salvador kinase complex, which in turn activates the Warts/Mats kinase complex. Warts/Mats kinase phosphorylates and inhibits Yorkie, a transcriptional coactivator that positively regulates cell growth, survival, and proliferation. This conserved signaling pathway contains several tumor-suppressor genes and regulates the contact inhibition of proliferation in cultured cells.