In Drosophila, the body axes are specified during oogenesis through interactions between the germline and the overlying somatic follicle cells [1-5]. A Gurken/TGF-alpha signal from the oocyte to the adjacent follicle cells assigns them a posterior identity [6, 7]. These posterior cells then signal back to the oocyte, thereby inducing the repolarization of the microtubule cytoskeleton, the migration of the oocyte nucleus, and the localization of the axis specifying mRNAs [8-10]. However, little is known about the signaling pathways within or from the follicle cells responsible for these patterning events. We show that the Salvador Warts Hippo (SWH) tumor-suppressor pathway is required in the follicle cells in order to induce their Gurken- and Notch-dependent differentiation and to limit their proliferation. The SWH pathway is also required in the follicle cells to induce axis specification in the oocyte, by inducing the migration of the oocyte nucleus, the reorganization of the cytoskeleton, and the localization of the mRNAs that specify the anterior-posterior and dorsal-ventral axes of the embryo. This work highlights a novel connection between cell proliferation, cell growth, and axis specification in egg chambers.