Stress fibers are major contractile actin structures in non-muscle cells where they have an important role in adhesion, morphogenesis and mechanotransduction. Palladin is a multidomain protein, which associates with stress fibers in a variety of cell types. However, the exact role of palladin in stress fiber assembly and maintenance has remained obscure, and whether it functions as an actin filament crosslinker or scaffolding protein was unknown. We demonstrate that palladin is specifically required for the assembly of non-contractile dorsal stress fibers, and is, consequently, essential for the generation of stress fiber networks and the regulation of cell morphogenesis in osteosarcoma cells migrating in a three-dimensional collagen matrix. Importantly, we reveal that palladin is necessary for the recruitment of vasodilator stimulated phosphoprotein (VASP) to dorsal stress fibers and that it promotes stress fiber assembly through VASP. Both palladin and VASP display similar rapid dynamics at dorsal stress fibers, suggesting that they associate with stress fibers as a complex. Thus, palladin functions as a dynamic scaffolding protein that promotes the assembly of dorsal stress fibers by recruiting VASP to these structures.