The Hippo pathway is an evolutionary conserved pathway that involves cell proliferation, differentiation, apoptosis and organ size regulation. Mst1 and Mst2 are central components of this pathway that are essential for embryonic development, though their role in controlling embryonic stem cells (ES cells) has yet to be exploited. To further understand the Mst1/Mst2 function in ES cell pluripotency and differentiation, we derived Mst1/Mst2 double knockout (Mst-/-) ES cells to completely perturb Hippo signaling. We found that Mst-/- ES cells express higher level of Nanog than wild type ES cells and show differentiation resistance after LIF withdrawal. They also proliferate faster than wild type ES cells. Although Mst-/- ES cells can form embryoid bodies (EBs), their differentiation into tissues of three germ layers is distorted. Intriguingly, Mst-/- ES cells are unable to form teratoma. Mst-/- ES cells can differentiate into mesoderm lineage, but further differentiation to cardiac lineage cells is significantly affected. Microarray analysis revealed that ligands of non-canonical Wnt signaling, which is critical for cardiac progenitor specification, are significantly repressed in Mst-/- EBs. Taken together our results showed that Mst1/Mst2 are required for proper cardiac lineage cell development and teratoma formation.