The Drosophila ovary is an attractive system to study how niches control stem cell self-renewal and differentiation. The niche for germline stem cells (GSCs) provides a Dpp/Bmp signal, which is essential for GSC maintenance. bam is both necessary and sufficient for the differentiation of immediate GSC daughters, cystoblasts. Here we show that Bmp signals directly repress bam transcription in GSCs in the Drosophila ovary. Similar to dpp, gbb encodes another Bmp niche signal that is essential for maintaining GSCs. The expression of phosphorylated Mad (pMad), a Bmp signaling indicator, is restricted to GSCs and some cystoblasts, which have repressed bam expression. Both Dpp and Gbb signals contribute to pMad production. bam transcription is upregulated in GSCs mutant for dpp and gbb. In marked GSCs mutant for Med and punt, two essential Bmp signal transducers, bam transcription is also elevated. Finally, we show that Med and Mad directly bind to the bam silencer in vitro. This study demonstrates that Bmp signals maintain the undifferentiated or self-renewal state of GSCs, and directly repress bam expression in GSCs by functioning as short-range signals. Thus, niche signals directly repress differentiation-promoting genes in stem cells in order to maintain stem cell self-renewal.