The intrinsic neurons of mushroom bodies (MBs), centers of olfactory learning in the Drosophila brain, are generated by a specific set of neuroblasts (Nbs) that are born in the embryonic stage and exhibit uninterrupted proliferation till the end of the pupal stage. Whereas MB provides a unique model to study proliferation of neural progenitors, the underlying mechanism that controls persistent activity of MB-Nbs is poorly understood. Here we show that Tailless (TLL), a conserved orphan nuclear receptor, is required for optimum proliferation activity and prolonged maintenance of MB-Nbs and ganglion mother cells (GMCs). Mutations of tll progressively impair cell cycle in MB-Nbs and cause premature loss of MB-Nbs in the early pupal stage. TLL is also expressed in MB-GMCs to prevent apoptosis and promote cell cycling. In addition, we show that ectopic expression of tll leads to brain tumors, in which Prospero, a key regulator of progenitor proliferation and differentiation, is suppressed whereas localization of molecular components involved in asymmetric Nb division is unaffected. These results as a whole uncover a distinct regulatory mechanism of self-renewal and differentiation of the MB progenitors that is different from the mechanisms found in other progenitors.