Phase separation of TAZ compartmentalizes the transcription machinery to promote gene expression

TAZ promotes cell proliferation, development, and tumorigenesis by regulating target gene transcription. However, how TAZ orchestrates the transcriptional responses remains poorly defined. Here we demonstrate that TAZ forms nuclear condensates via liquid-liquid phase separation to compartmentalize its DNA binding co-factor TEAD4, the transcription co-activators BRD4 and MED1 and the transcription elongation factor CDK9 for activation of gene expression. TAZ, but not its paralog YAP, forms phase-separated droplets in vitro and liquid-like nuclear condensates in cells and tissues, and this ability is negatively regulated by Hippo signaling via LATS-mediated phosphorylation and mediated by the coiled-coil domain. Deletion of the TAZ coiled-coil domain or substitution with the YAP coiled-coil domain does not affect the interaction with its partners, but prevents its phase separation and more importantly, its ability to induce expression of TAZ-specific target genes. Thus, our study has identified a novel mechanism for the transcriptional activation by TAZ and demonstrated for the first time that pathway-specific transcription factors also engage the phase separation mechanism for efficient and specific transcription activation. RNA profiles of WT, TAZ-KO, TAZ-KO+Flag-TAZ, TAZ-KO+Flag-TAZ-deltaCC, and YAP-KO MDA-MB-231 cells were generated by deep sequencing, using Illumina NovaSeq.