The Drosophila melanogaster lymph gland is a haematopoietic organ in which pluripotent blood cell progenitors proliferate and mature into differentiated haemocytes. Previous work has defined three domains, the medullary zone, the cortical zone and the posterior signalling centre (PSC), within the developing third-instar lymph gland. The medullary zone is populated by a core of undifferentiated, slowly cycling progenitor cells, whereas mature haemocytes comprising plasmatocytes, crystal cells and lamellocytes are peripherally located in the cortical zone. The PSC comprises a third region that was first defined as a small group of cells expressing the Notch ligand Serrate. Here we show that the PSC is specified early in the embryo by the homeotic gene Antennapedia (Antp) and expresses the signalling molecule Hedgehog. In the absence of the PSC or the Hedgehog signal, the precursor population of the medullary zone is lost because cells differentiate prematurely. We conclude that the PSC functions as a haematopoietic niche that is essential for the maintenance of blood cell precursors in Drosophila. Identification of this system allows the opportunity for genetic manipulation and direct in vivo imaging of a haematopoietic niche interacting with blood precursors.