Presence of inflammatory factors in the tumor microenvironment is well-documented yet their specific role in tumorigenesis is elusive. The core inflammatory pathways like the Toll-Like Receptor (TLR) and the Tumor Necrosis Factor (TNF) pathway are conserved in Drosophila. We induced GFP-marked epithelial tumors by expressing activated oncogenic forms of Ras or Yorkie (Yki, mammalian YAP) in scribble deficient cells (scrib, mammalian SCRIB) to study the role of inflammatory factors in tumorigenesis. Similar to Rasscrib, we found that Ykiscrib form invasive neoplastic lethal tumors that induce a systemic inflammatory response. We identified Cactus (Cact, mammalian IκBα), the negative regulator of TLR, as a key player in tumor growth. Cact accumulates in the cytoplasm in Drosophila tumor models, similar to squamous cell carcinoma in mice models and human patients where cytoplasmic IκBα favors oncogenic transformation. Further, cact is transcriptionally upregulated in tumors, and downregulation of Cact affects tumor growth. We investigated if TLR or TNF pathway affect tumor growth through activation of Jun N-terminal Kinase (JNK) pathway and its target Matrix Metalloprotease1 (MMP1). Genetically manipulating levels of TLR components or TNF receptors showed that Cact acts upstream of JNK signaling and regulates JNK via a non-canonical mechanism during tumorigenesis. Further, Hippo coactivator Yki transcriptionally regulates cact expression, and downregulation of Yki or Cact is sufficient to cause downregulation of JNK-mediated signaling that promotes tumorigenesis. Here, we report a link between Hippo, IκBα and JNK signaling that may induce inflammation and innate immune response in tumorigenesis.