The transition from a Drosophila ovarian germline stem cell (GSC) to its differentiated daughter cell, the cystoblast, is controlled by both niche signals and intrinsic factors. piwi and pumilio (pum) are essential for GSC self-renewal, whereas bag-of-marbles (bam) is required for cystoblast differentiation. We demonstrate that Piwi and Bam proteins are expressed independently of each other in reciprocal patterns in GSCs and cystoblasts. However, overexpression of either one antagonizes the other in these cells. Furthermore, piwi;bam double mutants phenocopy the bam mutant. This epistasis reflects the niche signaling function of piwi because depleting piwi from niche cells in bam mutant ovaries also phenocopies bam mutants. Thus, bam is epistatic to niche Piwi, but not germline Piwi function. Despite this, bam- ovaries lacking germline Piwi contain approximately 4-fold fewer germ cells than bam- ovaries, consistent with the role of germline Piwi in promoting GSC mitosis by 4-fold. Finally, pum is epistatic to bam, indicating that niche Piwi does not regulate Bam-C through Pum. We propose that niche Piwi maintains GSCs by repressing bam expression in GSCs, which consequently prevents Bam from downregulating Pum/Nos function in repressing the translation of differentiation genes and germline Piwi function in promoting germ cell division.