Drosophila neuroblasts have served as a model to understand how the balance of stem cell self-renewal versus differentiation is achieved. Drosophila Numb protein regulates this process through its preferential segregation into the differentiating daughter cell. How Numb restricts the proliferation and self-renewal potentials of the recipient cell remains enigmatic. Here, we show that phosphorylation at conserved sites regulates the tumor suppressor activity of Numb. Enforced expression of a phospho-mimetic form of Numb (Numb-TS4D) or genetic manipulation that boosts phospho-Numb levels, attenuates endogenous Numb activity and causes ectopic neuroblast formation (ENF). This effect on neuroblast homeostasis occurs only in the type II neuroblast lineage. We identify Dronc caspase as a novel binding partner of Numb, and demonstrate that overexpression of Dronc suppresses the effects of Numb-TS4D in a non-apoptotic and possibly non-catalytic manner. Reduction of Dronc activity facilitates ENF induced by phospho-Numb. Our findings uncover a molecular mechanism that regulates Numb activity and suggest a novel role for Dronc caspase in regulating neural stem cell homeostasis.