Drosophila intestinal stem cells (ISCs) generate enterocytes (ECs) and enteroendocrine (ee) cells. Previous work suggests that different levels of the Notch ligand Delta (Dl) in ISCs unidirectionally activate Notch in daughters to control multipotency. However, the mechanisms driving different outcomes remain unknown. We found that during ee cell formation, the ee cell marker Prospero localizes to the basal side of dividing ISCs. After asymmetric division, the ee daughter cell acts as a source of Dl that induces low Notch activity in the ISC to maintain identity. Alternatively, ISCs expressing Dl induce high Notch activity in daughter cells to promote EC formation. Our data reveal a conserved role for Notch in Drosophila and mammalian ISC maintenance and suggest that bidirectional Notch signaling may regulate multipotency in other systems.