In adult epithelial stem cell lineages, the precise differentiation of daughter cells is critical to maintain tissue homeostasis. Notch signaling controls the choice between absorptive and entero-endocrine cell differentiation in both the mammalian small intestine and the Drosophila midgut, yet how Notch promotes lineage restriction remains unclear. Here, we describe a role for the transcription factor Klumpfuss (Klu) in restricting the fate of enteroblasts (EBs) in the Drosophila intestine. Klu is induced in Notch-positive EBs and its activity restricts cell fate towards the enterocyte (EC) lineage. Transcriptomics and DamID profiling show that Klu suppresses enteroendocrine (EE) fate by repressing the action of the proneural gene Scute, which is essential for EE differentiation. Loss of Klu results in differentiation of EBs into EE cells. Our findings provide mechanistic insight into how lineage commitment in progenitor cell differentiation can be ensured downstream of initial specification cues.