The ability to balance self-renewal and differentiation is a hallmark of stem cells. In Drosophila neural stem cells (NSCs), Numb/Notch (N) signaling plays a key role in this process. However, the molecular and cellular mechanisms underlying Numb function in a stem cell setting remain poorly defined. Here we show that α-Adaptin (α-Ada), a subunit of the endocytic AP-2 complex, interacts with Numb through a new mode of interaction to regulate NSC homeostasis. In α-ada mutants, N pathway component Sanpodo and the N receptor itself exhibited altered trafficking, and N signaling was up-regulated in the intermediate progenitors of type II NSC lineages, leading to their transformation into ectopic NSCs. Surprisingly, although the Ear domain of α-Ada interacts with the C terminus of Numb and is important for α-Ada function in the sensory organ precursor lineage, it was dispensable in the NSCs. Instead, α-Ada could regulate Sanpodo, N trafficking, and NSC homeostasis by interacting with Numb through new domains in both proteins previously not known to mediate their interaction. This interaction could be bypassed when α-Ada was directly fused to the phospho-tyrosine binding domain of Numb. Our results identify a critical role for the AP-2-mediated endocytosis in regulating NSC behavior and reveal a new mechanism by which Numb regulates NSC behavior through N. These findings are likely to have important implications for cancer biology.