MPDZ also named MUPP1 is involved in signal transduction mediated by the formation of protein complexes. However, the expression regulation, clinical significance, potential function, and mechanism of this gene in lung cancer remain unclear. Methylation status of MPDZ was measured by methylation-specific PCR and bisulfite genomic sequencing. Kaplan-Meier and Cox regression analyses were performed to identify the prognostic value of MPDZ. The tumor suppressing effects of MPDZ were determined in vitro and in vivo. The target molecules and signaling pathway that mediated the function of MPDZ were also identified. MPDZ methylation was identified in 61.2% of primary lung cancer tissues and most lung cancer cell lines but not in normal lung tissues. MPDZ expression was significantly downregulated in lung cancer tissues and negatively associated with DNA hypermethylation, and attenuated MPDZ expression predicted a poor outcome. Furthermore, MPDZ overexpression prominently dampened cell growth, migration, and invasion of tumor cells. Conversely, MPDZ knockdown promoted cell proliferation, migration, and invasion in vitro and in vivo. Moreover, MPDZ deficiency promotes tumor metastasis and reduces the survival of MPDZ knockout mice. Importantly, MPDZ promotes tumor suppressor ability that depends on the Hippo pathway-mediated repression of YAP. MPDZ activates the phosphorylation of YAP (Ser127) and inhibits YAP expression through stabilizing MST1 and interaction with LATS1. We first identified and validated that MPDZ methylation and expression could be a good diagnostic marker and independent prognostic factor for lung cancer. MPDZ functions as a tumor suppressor by inhibiting cell proliferation, migration, and invasion through regulating the Hippo-YAP signaling pathway.