Stem cells maintain tissue homeostasis by proliferating to replace cells lost to damage or natural turnover. Whereas stem and progenitor cells proliferate, fully differentiated cells exit the cell cycle. How cell identity and cell cycle state are coordinated during this process is still poorly understood. The Drosophila testis niche supports germline stem cells and somatic cyst stem cells (CySCs), which are the only proliferating somatic cells in the testis. CySCs give rise to post-mitotic cyst cells and therefore provide a tractable model to ask how stem cell identity is linked to proliferation. We show that the G1/S cyclin, Cyclin E, is required for CySC self-renewal; however, its canonical transcriptional regulator, a complex of the E2f1 and Dp transcription factors is dispensable for self-renewal and cell cycle progression. Nevertheless, we demonstrate that E2f1/Dp activity must be silenced to allow CySCs to differentiate. We show that E2f1/Dp activity inhibits the expression of genes important for mitochondrial activity. Furthermore, promoting mitochondrial activity or biogenesis is sufficient to rescue the differentiation of CySCs with ectopic E2f1/Dp activity but not their exit from the cell cycle. Our findings together indicate that E2f1/Dp coordinates cell cycle progression with stem cell identity by regulating the metabolic state of CySCs.