The TRIM-NHL protein Brain tumor (Brat) acts as a tumor suppressor in the Drosophila brain, but how it suppresses tumor formation is not completely understood. Here, we combine temperature-controlled brat RNAi with transcriptome analysis to identify the immediate Brat targets in Drosophila neuroblasts. Besides the known target Deadpan (Dpn), our experiments identify the transcription factor Zelda (Zld) as a critical target of Brat. Our data show that Zld is expressed in neuroblasts and required to allow re-expression of Dpn in transit-amplifying intermediate neural progenitors. Upon neuroblast division, Brat is enriched in one daughter cell where its NHL domain directly binds to specific motifs in the 3'UTR of dpn and zld mRNA to mediate their degradation. In brat mutants, both Dpn and Zld continue to be expressed, but inhibition of either transcription factor prevents tumorigenesis. Our genetic and biochemical data indicate that Dpn inhibition requires higher Brat levels than Zld inhibition and suggest a model where stepwise post-transcriptional inhibition of distinct factors ensures sequential generation of fates in a stem cell lineage.