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The adult Drosophila midgut contains multipotent intestinal stem cells (ISCs) scattered along its basement membrane that have been shown by lineage analysis to generate both enterocytes and enteroendocrine cells. ISCs containing high levels of cytoplasmic Delta-rich vesicles activate the canonical Notch pathway and down-regulate Delta within their daughters, a process that programs these daughters to become enterocytes. ISCs that express little vesiculate Delta, or are genetically impaired in Notch signaling, specify their daughters to become enteroendocrine cells. Thus, ISCs control daughter cell fate by modulating Notch signaling over time. Our studies suggest that ISCs actively coordinate cell production with local tissue requirements by this mechanism.