Lung development requires a co-ordinated switch from branching morphogenesis to epithelial differentiation into alveoli. Epithelial differentiation is known to involve Hippo, Fgf10 and Wnt/β-catenin signalling, but the mechanisms that regulate and integrate these networks have remained elusive. Now, Stijn De Langhe and colleagues reveal that a focal adhesion protein, integrin-linked pseudo-kinase (Ilk), can modulate Hippo signalling activity and in turn, Hippo regulates β-catenin and Fgf10. Using sophisticated genetic rescue experiments in mice, the authors show that loss of Ilk increases nuclear localisation of the Hippo transcriptional activators, Yap and Taz, as well as promoting β-catenin and Fgf10 activity. These results indicate that Ilk-mediated retention of Yap/Taz in the cytoplasm cell-autonomously restrains β-catenin signalling. Finally, by impeding nuclear localisation of Yap/Taz, Ilk also prevents mesenchymal expression of Fgf10 through loss of Yap-directed gene expression. Ilk and Hippo therefore promote epithelial differentiation through this intricate feedback network. This study provides the first genetic evidence that Yap, Taz and β-catenin functionally cooperate to control lung maturation. Finally, the role of Ilk might indicate how the extracellular matrix and mechanical cues mediate signalling and cell differentiation during lung development.