RNA-binding Fox (Rbfox) proteins have well-established roles in regulating alternative splicing, but specific Rbfox isoforms lack nuclear localization signals and accumulate in the cytoplasm. The potential splicing-independent functions of these proteins remain unknown. Here we demonstrate that cytoplasmic Drosophila Rbfox1 regulates germ cell development and represses the translation of mRNAs containing (U)GCAUG elements within their 3'UTRs. During germline cyst differentiation, Rbfox1 targets pumilio mRNA for destabilization and translational silencing, thereby promoting germ cell development. Mis-expression of pumilio results in the formation of germline tumors, which contain cysts that break down and dedifferentiate back to single, mitotically active cells. Together, these results reveal that cytoplasmic Rbfox family members regulate the translation of specific target mRNAs. In the Drosophila ovary, this activity provides a genetic barrier that prevents germ cells from reverting back to an earlier developmental state. The finding that Rbfox proteins regulate mRNA translation has implications for Rbfox-related diseases.