Pez functions as an upstream negative regulator of Yorkie (Yki) to regulate intestinal stem cell (ISC) proliferation and is essential for the activity of the Hippo pathway specifically in the Drosophila midgut epithelium. Here we report that Suppressor of Deltex (Su(dx)) acts as a negative regulator of Pez. We show that Su(dx) targets Pez for degradation both in vitro and in vivo. Overexpression of Su(dx) induces proliferation in the fly midgut epithelium, which can be rescued by overexpressed Pez. We also demonstrate that the interaction between Su(dx) and Pez, bridged by WW domains and PY/PPxY motifs, is required for Su(dx)-mediated Pez degradation. Furthermore, we find that Kibra, a binding partner of Pez, stabilizes Pez via WW-PY/PPxY interaction. Moreover, PTPN14, a Pez mammalian homolog, is degraded by overexpressed Su(dx) or Su(dx) homologue WWP1 in mammalian cells. These results reveal a previously unrecognized mechanism of Pez degradation in maintaining the homeostasis of Drosophila midgut.