PyPy absolutely supports generators. Python's stdlib uses them extensively.

If you were worrying about the JIT not supporting them, it appears to just fine:

gentest.py:

  def gen():
      for i in xrange(10**9):
          yield i

  for i in gen():
      pass

  $ time python gentest.py # python 2.7

  real	1m12.956s
  user	1m12.736s
  sys	0m0.000s

  $ time pypy gentest.py # pypy 2.0.2

  real	0m5.728s
  user	0m5.708s
  sys	0m0.000s