SOX2 positive pituitary stem cells (PSCs) are specified embryonically and persist throughout life, giving rise to all pituitary endocrine lineages. We have previously shown the activation of the STK/LATS/YAP/TAZ signalling cascade in the developing and postnatal mammalian pituitary. Here, we investigate the function of this pathway during pituitary development and in the regulation of the SOX2 cell compartment. Through loss- and gain-of-function genetic approaches, we reveal that restricting YAP/TAZ activation during development is essential for normal organ size and specification from SOX2+ PSCs. Postnatal deletion of LATS kinases and subsequent upregulation of YAP/TAZ leads to uncontrolled clonal expansion of the SOX2+ PSCs and disruption of their differentiation, causing the formation of non-secreting, aggressive pituitary tumours. In contrast, sustained expression of YAP alone results in expansion of SOX2+ PSCs capable of differentiation and devoid of tumourigenic potential. Our findings identify the LATS/YAP/TAZ signalling cascade as an essential component of PSC regulation in normal pituitary physiology and tumourigenesis.