Tumor suppressor Lats2 is a member of the conserved Dbf2 kinase family. It localizes to the centrosome and has been implicated in regulation of the cell cycle and apoptosis. However, the in vivo function of this kinase remains unclear. Here, we show that complete disruption of the gene encoding Lats2 in mice causes developmental defects in the nervous system and embryonic lethality. Furthermore, mutant cells derived from total LATS2-knock-out embryos exhibit mitotic defects including centrosome fragmentation and cytokinesis defects, followed by nuclear enlargement and multinucleation. We show that the Mob1 family, a regulator of mitotic exit, associates with Lats2 to induce its activation. We also show that the complete LATS2-knock-out cells exhibit an acceleration of exit from mitosis and marked down-regulation of critical mitotic regulators. These results suggest that Lats2 plays an essential mitotic role in coordinating accurate cytokinesis completion, governing the stabilization of other mitotic regulators.