Many tissues are produced during development by specialized progenitor cells emanating from epithelia via an Epithelial-to-Mesenchymal Transition (EMT). Most studies have so far focused on cases 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 requires the E3 ubiquitin ligase Neuralized and RhoGEF3. Neuralized down-regulates the apical protein Crumbs via its interaction with Stardust. Disrupting the regulation of Crumbs by Neuralized led to defects in apical constriction and junctional myosin accumulation, and to imprecision in the integration of emerging NSCs into the transition front. Neuralized therefore appears to mechanically couple NSC fate acquisition with cell-cell rearrangement to promote smooth progression of the differentiation front.