The niches of the Arabidopsis shoot and root meristems, the organizing center (OC) and the quiescent center (QC), orchestrate the fine balance of stem cell maintenance and the provision of differentiating descendants. They express the functionally related homeobox genes WUSCHEL (WUS) and WOX5, respectively, that promote stem cell fate in adjacent cells. Shoot stem cells signal back to the OC by secreting the CLAVATA3 (CLV3) dodecapeptide, which represses WUS expression. However, the signals controlling homeostasis of the root stem cell system are not identified to date. Here we show that the differentiating descendants of distal root stem cells express CLE40, a peptide closely related to CLV3. Reducing CLE40 levels delays differentiation and allows stem cell proliferation. Conversely, increased CLE40 levels drastically alter the expression domain of WOX5 and promote stem cell differentiation. We report that the receptor kinase ACR4, previously shown to control cell proliferation, is an essential component, and also a target, of CLE40 signaling. Our results reveal how, in contrast to the shoot system, signals originating from differentiated cells, but not the stem cells, determine the size and position of the root niche.