Intestinal homeostasis is tightly regulated by the reciprocal interaction between gut epithelium and adjacent mesenchyme. The mammalian Hippo-YAP pathway is intimately associated with intestinal epithelial homeostasis and re-generation; however, its role in postnatal gut mesenchyme remains poorly defined. We find that, although removal of the core Hippo kinases Lats1/2 or activation of YAP in adult intestinal smooth muscle has largely no effect; Hippo-YAP signaling in Gli1/PDGFR-expressing intestinal stromal cells is critical to maintain the stem cell niche. We show that YAP/TAZ activation drives over-proliferation and suppresses smooth muscle actin expression in the niche-forming Gli1+ mesenchymal progenitors. In addition, mesenchymal YAP/TAZ activation disrupts the epithelial-mesenchymal crosstalk by promoting Wnt ligand production, leading to epithelial Wnt pathway activation. Our data also reveal that YAP/TAZ are upregulated in the stroma during DSS-induced injury and stromal YAP activation promotes intestinal epithelial regeneration. Altogether, our data identify an essential requirement for stromal Hippo-YAP signaling in the stem cell niche during intestinal homeostasis.