Bone fracture repair initiates by periosteal expansion. The periosteum is typically quiescent, but upon fracture, periosteal cells proliferate and contribute to bone fracture repair. The expansion of the periosteum is regulated by gene transcription; however, the molecular mechanisms behind periosteal expansion are unclear. Here, we show that Yes-Associated Protein (YAP) and transcriptional co-activator with PDZ-binding motif (TAZ) mediate periosteal expansion and periosteal cell proliferation. Bone fracture increases the number of YAP-expressing periosteal cells, and deletion of YAP and TAZ from Osterix (Osx) expressing cells impairs early periosteal expansion. Mechanistically, YAP regulates both ‘cell-intrinsic’ and ‘cell-extrinsic’ factors that allow for periosteal expansion. Specifically, we identified Bone Morphogenetic Protein 4 (BMP4) as a cell extrinsic factor regulated by YAP, that rescues the impairment of periosteal expansion upon YAP/TAZ deletion. Together, these data establish YAP mediated transcriptional mechanisms that induce periosteal expansion in the early stages of fracture repair and provide new putative targets for therapeutic interventions.