Membrane trafficking is defined as the vesicular transport of molecules throughout the cell. In intestinal enterocytes, defects in endocytic/recycling pathways impair their function and are linked to genetic diseases. How does trafficking regulate intestinal tissue homeostasis is poorly understood. Using the Drosophila intestine as an in vivo model system, we investigated enterocyte-specific functions for early endosomal trafficking in gut homeostasis. We focused on the small GTPase Rab21 that regulates specific early endosomal trafficking steps. Rab21-depleted guts showed severe intestinal morphology abnormalities, with deregulated homeostasis associated with a gain in mitotic cells and increased cell death. Increased in both apoptosis and Yki signaling were responsible for compensatory proliferation and tissue inflammation. Using a RNAi screen, we identified autophagy and specific membrane trafficking regulators phenocopying Rab21 loss. We further showed that Rab21-induced hyperplasia was rescued by inhibition of Egfr signaling, and we identified improperly trafficked cargoes in enterocytes depleted of Rab21. Our data shed light on an important role for the early endosomal protein Rab21, and early endosomal trafficking in enterocytes-mediated intestinal homeostasis.