In Drosophila, intestinal stem cells (ISCs) respond to oxidative challenges and inflammation by increasing proliferation rates. This phenotype is part of a regenerative response, but can lead to hyperproliferation and epithelial degeneration in the aging animal. Here we show that Nrf2, a master regulator of the cellular redox state, specifically controls the proliferative activity of ISCs, promoting intestinal homeostasis. We find that Nrf2 is constitutively active in ISCs and that repression of Nrf2 by its negative regulator Keap1 is required for ISC proliferation. We further show that Nrf2 and Keap1 exert this function in ISCs by regulating the intracellular redox balance. Accordingly, loss of Nrf2 in ISCs causes accumulation of reactive oxygen species and accelerates age-related degeneration of the intestinal epithelium. Our findings establish Keap1 and Nrf2 as a critical redox management system that regulates stem cell function in high-turnover tissues.