Adult liver regeneration requires induction and suppression of proliferative activity in multiple types of liver cells. The mechanisms that orchestrate the global changes in gene expression that are required for proliferative activity to change within individual liver cells, and that coordinate proliferative activity among different types of liver cells, are not well understood. Morphogenic signaling pathways that are active during fetal development, including Hedgehog and Hippo/Yes‐associated protein 1 (Yap1), regulate liver regeneration in adulthood. Cirrhosis and liver cancer result when these pathways become dysregulated, but relatively little is known about the mechanisms that coordinate and control morphogenic signaling during effective liver regeneration. We evaluated the hypothesis that the Hedgehog pathway controls Yap1 activation during liver regeneration by studying intact mice and cultured liver cells. In cultured hepatic stellate cells (HSCs), disrupting Hedgehog signaling blocked activation of Yap1, and knocking down Yap1 inhibited induction of both Yap1‐ and Hedgehog‐regulated genes that enable HSC to become myofibroblasts (MFs). In mice, disrupting Hedgehog signaling in MFs inhibited liver regeneration after partial hepactectomy (PH). Reduced proliferative activity in the liver epithelial compartment resulted from loss of stroma‐derived paracrine signals that activate Yap1 and the Hedgehog pathway in hepatocytes. This prevented hepatocytes from up‐regulating Yap1‐ and Hedgehog‐regulated transcription factors that normally promote their proliferation. Conclusions : Morphogenic signaling in HSCs is necessary to reprogram hepatocytes to regenerate the liver epithelial compartment post‐PH. This discovery identifies novel molecules that might be targeted to correct defective repair during cirrhosis and liver cancer. (H epatology 2016;64:232–244)