YAP/TEAD signaling is essential for organismal development, cell proliferation, and cancer progression. As a transcriptional coactivator, how YAP activates its downstream target genes is incompletely understood. YAP forms biomolecular condensates in response to hyperosmotic stress, concentrating transcription-related factors to activate downstream target genes. However, whether YAP forms condensates under other signals, how YAP condensates organize and function, and how YAP condensates activate transcription in general are unknown. Here, we report that endogenous YAP forms sub-micron scale condensates in response to Hippo pathway regulation and actin cytoskeletal tension. YAP condensates are stabilized by the transcription factor TEAD1, and recruit BRD4, a coactivator that is enriched at active enhancers. Using single-particle tracking, we found that YAP condensates slowed YAP diffusion within condensate boundaries, a possible mechanism for promoting YAP target search. These results reveal that YAP condensate formation is a highly regulated process that is critical for YAP/TEAD target gene expression.