The adult Drosophila midgut is maintained by intestinal stem cells (ISCs) that generate both self-renewing and differentiating daughter cells. How this asymmetry is generated is currently unclear. Here, we demonstrate that asymmetric ISC division is established by a unique combination of extracellular and intracellular polarity mechanisms. We show that Integrin-dependent adhesion to the basement membrane induces cell-intrinsic polarity and results in the asymmetric segregation of the Par proteins Par-3, Par-6, and aPKC into the apical daughter cell. Cell-specific knockdown and overexpression experiments suggest that increased activity of aPKC enhances Delta/Notch signaling in one of the two daughter cells to induce terminal differentiation. Perturbing this mechanism or altering the orientation of ISC division results in the formation of intestinal tumors. Our data indicate that mechanisms for intrinsically asymmetric cell division can be adapted to allow for the flexibility in lineage decisions that is required in adult stem cells.