Many tissues are produced by specialized progenitor cells emanating from epithelia via epithelial-to-mesenchymal transition (EMT). Most studies have so far focused on EMT involving single or isolated groups of cells. Here we describe an EMT-like process that requires tissue-level coordination. This EMT-like process occurs along a continuous front in the Drosophila optic lobe neuroepithelium to produce neural stem cells (NSCs). We find that emerging NSCs remain epithelial and apically constrict before dividing asymmetrically to produce neurons. Apical constriction is associated with contractile myosin pulses and involves RhoGEF3 and down-regulation of the Crumbs complex by the E3 ubiquitin ligase Neuralized. Anisotropy in Crumbs complex levels also results in accumulation of junctional myosin. Disrupting the regulation of Crumbs by Neuralized lowered junctional myosin and led to imprecision in the integration of emerging NSCs into the front. Thus, Neuralized promotes smooth progression of the differentiation front by coupling epithelium remodeling at the tissue level with NSC fate acquisition.