Identification of cancer driver mutations is critical for advancing cancer research and personalized medicine. Due to inter-tumor genetic heterogeneity, many driver mutations occur at low frequencies, which make it challenging to distinguish them from passenger mutations. Here, we show that a novel Bayesian hierarchical modeling approach, named rDriver can achieve enhanced prediction accuracy by identifying mutations that not only have high functional impact scores but also are associated with systemic variation in gene expression levels. In examining 3,080 tumor samples from 8 cancer types in The Cancer Genome Atlas, rDriver predicted 1,389 driver mutations. Compared with existing tools, rDriver identified more low frequency mutations associated with lineage specific functional properties, timing of occurrence and patient survival. Evaluation of rDriver predictions using engineered cell-line models resulted in a positive predictive value of 0.94 in PIK3CA genes. Our study highlights the importance of integrating multi-omic data in predicting cancer driver mutations and provides a statistically rigorous solution for cancer target discovery and development.