Btk29A is the Drosophila ortholog of the mammalian Bruton's tyrosine kinase (Btk), mutations of which in humans cause a heritable immunodeficiency disease. Btk29A mutations stabilized the proliferating cystoblast fate, leading to an ovarian tumor. This phenotype was rescued by overexpression of wild-type Btk29A and phenocopied by the interference of Wnt4-β-catenin signaling or its putative downstream nuclear protein Piwi in somatic escort cells. Btk29A and mammalian Btk directly phosphorylated tyrosine residues of β-catenin, leading to the up-regulation of its transcriptional activity. Thus, we identify a transcriptional switch involving the kinase Btk29A/Btk and its phosphorylation target, β-catenin, which functions downstream of Wnt4 in escort cells to terminate Drosophila germ cell proliferation through up-regulation of piwi expression. This signaling mechanism likely represents a versatile developmental switch.