The E proteins and Id proteins are, respectively, the positive and negative heterodimer partners for the basic-helix-loop-helix protein family and as such contribute to a remarkably large number of cell-fate decisions. E proteins and Id proteins also function to inhibit or promote cell proliferation and cancer. Using a genetic modifier screen in Drosophila, we show that the Id protein Extramacrochaetae enables growth by suppressing activation of the Salvador-Warts-Hippo pathway of tumor suppressors, activation that requires transcriptional activation of the expanded gene by the E protein Daughterless. Daughterless protein binds to an intronic enhancer in the expanded gene, both activating the SWH pathway independently of the transmembrane protein Crumbs and bypassing the negative feedback regulation that targets the same expanded enhancer. Thus, the Salvador-Warts-Hippo pathway has a cell-autonomous function to prevent inappropriate differentiation due to transcription factor imbalance and monitors the intrinsic developmental status of progenitor cells, distinct from any responses to cell-cell interactions.