Cells in intestinal epithelia turn over rapidly due to damage from digestion and toxins produced by the enteric microbiota. Gut homeostasis is maintained by intestinal stem cells (ISCs) that divide to replenish the intestinal epithelium, but little is known about how ISC division and differentiation are coordinated with epithelial cell loss. We show here that when enterocytes (ECs) in the Drosophila midgut are subjected to apoptosis, enteric infection, or JNK-mediated stress signaling, they produce cytokines (Upd, Upd2, and Upd3) that activate Jak/Stat signaling in ISCs, promoting their rapid division. Upd/Jak/Stat activity also promotes progenitor cell differentiation, in part by stimulating Delta/Notch signaling, and is required for differentiation in both normal and regenerating midguts. Hence, cytokine-mediated feedback enables stem cells to replace spent progeny as they are lost, thereby establishing gut homeostasis.