Asymmetric cell division (ACD) is a broadly used mechanism for generating cellular diversity. Molecules known as fate determinants are segregated during ACD to generate distinct sibling cell fates, but determinants should not be activated until fate can be specified asymmetrically. Determinants could be activated after cell division but many animal cells complete division long after mitosis ends, raising the question of how activation could occur at mitotic exit taking advantage of the unique state plasticity at this time point. Here we show that the midbody, a microtubule-rich structure that forms in the intercellular bridge connecting nascent siblings, mediates fate determinant activation at mitotic exit in neural stem cells (NSCs) of the Drosophila larval brain. The fate determinants Prospero (Pros) and Brain tumor (Brat) are sequestered at the NSC membrane at metaphase but are released immediately following nuclear division when the midbody forms, well before cell division completes. The midbody isolates nascent sibling cytoplasms, allowing determinant release from the membrane via the cell cycle phosphatase String, without influencing the fate of the incorrect sibling. Our results identify the midbody as a key facilitator of ACD that allows asymmetric fate determinant activation to be initiated before division.