Malignant peripheral nerve sheath tumors (MPNSTs) are highly aggressive Schwann cell (SC)-lineage-derived sarcomas. Molecular events driving SC-to-MPNST transformation are incompletely understood. Here, we show that human MPNSTs exhibit elevated HIPPO-TAZ/YAP expression, and that TAZ/YAP hyperactivity in SCs caused by Lats1/2 loss potently induces high-grade nerve-associated tumors with full penetrance. Lats1/2 deficiency reprograms SCs to a cancerous, progenitor-like phenotype and promotes hyperproliferation. Conversely, disruption of TAZ/YAP activity alleviates tumor burden in Lats1/2-deficient mice and inhibits human MPNST cell proliferation. Moreover, genome-wide profiling reveals that TAZ/YAP-TEAD1 directly activates oncogenic programs, including platelet-derived growth factor receptor (PDGFR) signaling. Co-targeting TAZ/YAP and PDGFR pathways inhibits tumor growth. Thus, our findings establish a previously unrecognized convergence between Lats1/2-TAZ/YAP signaling and MPNST pathogenesis, revealing potential therapeutic targets in these untreatable tumors. Wu et al. find that HIPPO-TAZ/YAP expression is elevated in malignant peripheral nerve sheath tumors (MPNST). Lats1/2 deficiency in Schwann cells induces hyperactivation of TAZ/YAP and increased PDGFR signaling, leading to the development of MPNST in mice. Inhibition of TAZ/YAP and PDGFR reduces MPNST growth. © 2018 Elsevier Inc.