Chromatin remodeling processes are among the most important regulatory mechanisms in controlling cell proliferation and regeneration. Drosophila intestinal stem cells (ISCs) exhibit self-renewal potentials, maintain tissue homeostasis, and serve as an excellent model for studying cell growth and regeneration. In this study, we show that Brahma (Brm) chromatin-remodeling complex is required for ISC proliferation and damage-induced midgut regeneration in a lineage-specific manner. ISCs and enteroblasts exhibit high levels of Brm proteins; and without Brm, ISC proliferation and differentiation are impaired. Importantly, the Brm complex participates in ISC proliferation induced by the Scalloped-Yorkie transcriptional complex and that the Hippo (Hpo) signaling pathway directly restricted ISC proliferation by regulating Brm protein levels by inducing caspase-dependent cleavage of Brm. The cleavage resistant form of Brm protein promoted ISC proliferation. Our findings highlighted the importance of Hpo signaling in regulating epigenetic components such as Brm to control downstream transcription and hence ISC proliferation. DOI:http://dx.doi.org/10.7554/eLife.00999.001.