Notch signaling activity regulates hematopoiesis inDrosophilaand vertebrates alike. Parasitoid wasp infestation ofDrosophilalarvae, however, requires a rapid downregulation of Notch activity to allow the formation of encapsulation-active blood cells. Here we show that theDrosophilaCSL transcription factor Suppressor of Hairless [Su(H)] is phosphorylated at Serine 269 in response to parasitoid wasp infestation. As this phosphorylation interferes with the DNA-binding of Su(H), it reversibly inhibits Notch activity. Accordingly, phospho-deficientSu(H)S269Amutants are immune compromised. A screen for kinases involved in Su(H) phosphorylation identified Pkc53E, required for normal hematopoiesis as well as for parasitoid immune response. Genetic and molecular interactions support the specificity of the Su(H)- Pkc53E relationship. Moreover, phorbol ester treatment inhibits Su(H) activity in vivo and in human cell culture. We conclude that Pkc53E targets Su(H) during parasitic wasp infestation, inducing downregulation of Notch activity, thereby remodeling the blood cell population required for wasp egg encapsulation.