Epigenetic inactivation of the Hippo pathway scaffold RASSF1A is associated with poor prognosis in a wide range of sporadic human cancers. Loss of expression reduces tumor suppressor activity and promotes genomic instability, but how this pleiotropic biomarker is regulated at the protein level is unknown. Here we show that TGF-β is the physiological signal that stimulates RASSF1A degradation by the ubiquitin-proteasome pathway. In response to TGF-β, RASSF1A is recruited to TGF-β receptor I and targeted for degradation by the co-recruited E3 ubiquitin ligase ITCH. RASSF1A degradation is necessary to permit Hippo pathway effector YAP1 association with SMADs and subsequent nuclear translocation of receptor-activated SMAD2. We find that RASSF1A expression regulates TGF-β-induced YAP1/SMAD2 interaction and leads to SMAD2 cytoplasmic retention and inefficient transcription of TGF-β targets genes. Moreover, RASSF1A limits TGF-β induced invasion, offering a new framework on how RASSF1A affects YAP1 transcriptional output and elicits its tumor-suppressive function.