A metabolic transition from glycolysis to oxidative phosphorylation is often associated with differentiation of many types of stem cells. However, the link between mitochondrial respiration and stem cells' behavior is not fully understood. We genetically disrupted electron transport chain (ETC) complexes in the intestinal stem cells (ISCs) of Drosophila. We found that ISCs carrying impaired ETC proliferated much more slowly than normal and produced very few enteroblasts, which failed to further differentiate into enterocytes. One of the main impediments to ISC proliferation and lineage specification appeared to be abnormally elevated forkhead box O (FOXO) signaling in the ETC-deficient ISCs, as genetically suppressing the signaling pathway partially restored the number of enterocytes. Contrary to common belief, reactive oxygen species (ROS) accumulation did not appear to mediate the ETC mutant phenotype. Our results demonstrate that mitochondrial respiration is essential for Drosophila ISC proliferation and lineage specification in vivo and acts at least partially by repressing endogenous FOXO signaling.