The establishment and maintenance of polarity is of fundamental importance for the function of epithelial and neuronal cells. In Drosophila, the multi-PDZ domain protein Bazooka (Baz) is required for establishment of apico-basal polarity in epithelia and in neuroblasts, the stem cells of the central nervous system. In the latter, Baz anchors Inscuteable in the apical cytocortex, which is essential for asymmetric localization of cell fate determinants and for proper orientation of the mitotic spindle. Here we show that Baz directly binds to the Drosophila atypical isoform of protein kinase C and that both proteins are mutually dependent on each other for correct apical localization. Loss-of-function mutants of the Drosophila atypical isoform of PKC show loss of apico-basal polarity, multilayering of epithelia, mislocalization of Inscuteable and abnormal spindle orientation in neuroblasts. Together, these data provide strong evidence for the existence of an evolutionary conserved mechanism that controls apico-basal polarity in epithelia and neuronal stem cells. This study is the first functional analysis of an atypical protein kinase C isoform using a loss-of-function allele in a genetically tractable organism.