The Hippo pathway orchestrates activity of stem cells during development and tissue regeneration and is crucial for controlling organ size. However, roles of the Hippo pathway in highly regenerative organisms, such as flatworms, are unknown. Here we show that knockdown of the Hippo pathway core genes in the flatworm Macrostomum lignano affects tissue homeostasis and causes formation of outgrowths through hyperproliferation of stem cells (neoblasts), and leads to disruption of allometric scaling during regeneration and increased size of regenerated parts. We further show that Yap, the downstream effector of the Hippo pathway, is a potential neoblast marker gene, as it is expressed in dividing cells in M. lignano and is essential for neoblast self-renewal. The phenotypes we observe in M. lignano upon knockdown of the Hippo pathway core genes and Yap are consistent with the known functions of the pathway in other model organisms and demonstrate that the Hippo pathway is functionally conserved between flatworms and mammals. This work establishes M. lignano as a productive model for investigation of the Hippo pathway.