Adult stem cells are the most primitive cells of a lineage and are distinguished by the properties of self-renewal and multipotency. Coordinated control of stem cell proliferation and multilineage differentiation is essential to ensure a steady output of differentiated daughter cells necessary to maintain tissue homeostasis. However, little is known about the signals that coordinate stem cell proliferation and daughter cell differentiation. Here we investigate the role of the conserved JAK/STAT signaling pathway in the Drosophila intestinal stem cell (ISC) lineage. We show first, that JAK/STAT signaling is normally active in both ISCs and their newly formed daughters, but not in terminally differentiated enteroendocrine (ee) cells or enterocyte (EC) cells. Second, analysis of ISC lineages shows that JAK/STAT signaling is necessary but not sufficient for daughter cell differentiation, indicating that competence to undergo multilineage differentiation depends upon JAK/STAT. Finally, our analysis reveals JAK/STAT signaling to be a potent regulator of ISC proliferation, but not ISC self-renewal. On the basis of these findings, we suggest a model in which JAK/STAT signaling coordinates the processes of stem cell proliferation with the competence of daughter cells to undergo multilineage differentiation, ensuring a robust cellular output in the lineage.