A dynamic pool of undifferentiated somatic stem cells proliferate and differentiate to replace dead or dying mature cell types and maintain the integrity and function of adult tissues. Intestinal stem cells (ISCs) in the Drosophila posterior midgut are a well established model to study the complex genetic circuitry that governs stem cell homeostasis. Exposure of the intestinal epithelium to environmental toxins results in the expression of cytokines and growth factors that drive the rapid proliferation and differentiation of ISCs. In the absence of stress signals, ISC homeostasis is maintained through intrinsic pathways. In this study, we uncovered the PDGF- and VEGF-receptor related (Pvr) pathway as an essential regulator of ISC homeostasis under unstressed conditions in the posterior midgut. We found that Pvr is coexpressed with its ligand Pvf2 in ISCs and that hyperactivation of the Pvr pathway distorts the ISC developmental program and drives intestinal dysplasia. In contrast, we show that mutant ISCs in the Pvf/Pvr pathway are defective in homeostatic proliferation and differentiation, resulting in a failure to generate mature cell types. Additionally, we determined that extrinsic stress signals generated by enteropathogenic infection are epistatic to the hypoplasia generated in Pvf/Pvr mutants, making the Pvr pathway unique among all previously studied intrinsic pathways. Our findings illuminate an evolutionarily conserved signal transduction pathway with essential roles in metazoan embryonic development and direct involvement in numerous disease states.