The Hippo pathway, by tightly controlling the phosphorylation state and activity of the transcription cofactors YAP and TAZ is essential during development and tissue homeostasis whereas its deregulation may lead to cancer. Recent studies have linked the apicobasal polarity machinery in epithelial cells to components of the Hippo pathway and YAP and TAZ themselves. However the molecular mechanism by which the junctional pool of YAP proteins is released and activated in epithelial cells remains unknown. Here we report that the tumour suppressor ASPP2 forms an apical-lateral polarity complex at the level of tight junctions in polarised epithelial cells, acting as a scaffold for protein phosphatase 1 (PP1) and junctional YAP via dedicated binding domains. ASPP2 thereby directly induces the dephosphorylation and activation of junctional YAP. Collectively, this study unearths a novel mechanistic paradigm revealing the critical role of the apical-lateral polarity complex in activating this localised pool of YAP in vitro, in epithelial cells, and in vivo, in the murine colonic epithelium. We propose that this mechanism may commonly control YAP functions in epithelial tissues.