The cytoplasmic tyrosine kinase Yes has previously been shown to have an important role in maintaining mouse and human embryonic stem (ES) self-renewal through an unknown pathway downstream of leukemia inhibitory factor (LIF) and one or more factors in serum. Here, we show that TEAD2 and its transcriptional co-activator, the Yes-associated protein YAP, co-operate in a signaling pathway downstream of Yes. We show that YAP, TEAD2 and Yes are highly expressed in self-renewing ES cells, are activated by LIF and serum, and are downregulated when cells are induced to differentiate. We also demonstrate that kinase-active Yes binds and phosphorylates YAP, and activates YAP–TEAD2-dependent transcription. We found that TEAD2 associates directly with the Oct-3/4 promoter. Moreover, activation of the Yes pathway induced activity of the Oct-3/4 and Nanog promoters, whereas suppression of this pathway inhibited promoter activity. Nanog, in turn, suppressed TEAD2-dependent promoter activity, whereas siRNA-mediated knockdown of Nanog induced it, suggesting a negative regulatory feedback loop. Episomal supertransfection of cells with inhibitory TEAD2–EnR induced endodermal differentiation, which suggests that this pathway is necessary for ES cell maintenance.