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Downregulation of the cylindromatosis (CYLD) tumor suppressor has been associated with breast cancer development and progression. Here, we report a critical role for CYLD in maintaining the phenotype of mammary epithelial cells in vitro and in vivo. CYLD downregulation or inactivation induced an epithelial to mesenchymal transition of mammary epithelial cells that was dependent on the concomitant activation of the transcription factors Yes-associated protein (YAP)/transcriptional coactivator with PDZ-binding motif (TAZ) and transforming growth factor beta (TGFβ)signaling. CYLD inactivation enhanced the nuclear localization of YAP/TAZ and the phosphorylation of Small Mothers Against Decapentaplegic (SMAD)2/3 proteins in confluent cell culture conditions. Consistent with these findings were the hyperplastic alterations of CYLD-deficient mouse mammary epithelia, which were associated with enhanced nuclear expression of the YAP/TAZ transcription factors. Furthermore, in human breast cancer samples, downregulation of CYLD expression correlates with enhanced YAP/TAZ-regulated target gene expression. Our results identify CYLD as a critical regulator of a signaling node that prevents the coordinated activation of YAP/TAZ and the TGFβ pathway in mammary epithelial cells, in order to maintain their phenotypic identity and homeostasis. Consequently, they provide a novel conceptual framework that supports and explains a causal implication of deficient CYLD expression in aggressive human breast cancers.