Vertebrate and invertebrate digestive systems show extensive similarities in their development, cellular makeup and genetic control. The Drosophila midgut is typical: enterocytes make up the majority of the intestinal epithelial monolayer, but are interspersed with hormone-producing enteroendocrine cells. Human (and mouse) intestinal cells are continuously replenished by stem cells, the misregulation of which may underlie some common digestive diseases and cancer. In contrast, stem cells have not been described in the intestines of flies, and Drosophila intestinal cells have been thought to be relatively stable. Here we use lineage labelling to show that adult Drosophila posterior midgut cells are continuously replenished by a distinctive population of intestinal stem cells (ISCs). As in vertebrates, ISCs are multipotent, and Notch signalling is required to produce an appropriate fraction of enteroendocrine cells. Notch is also required for the differentiation of ISC daughter cells, a role that has not been addressed in vertebrates. Unlike previously characterized stem cells, which reside in niches containing a specific partner stromal cell, ISCs adjoin only the basement membrane, differentiated enterocytes and their most recent daughters. The identification of Drosophila intestinal stem cells with striking similarities to their vertebrate counterparts will facilitate the genetic analysis of normal and abnormal intestinal function.