Drosophila ovarian germline stem cells (GSCs) are maintained by the extracellular BMP2/4 orthologue Dpp, which is produced from the surrounding somatic niche. The Dpp signal has a short range; it induces a response in GSCs within the niche, but is rapidly extinguished in their progeny only one cell-diameter away. To ensure the correct balance between stem-cell maintenance and differentiation, several regulatory mechanisms that modulate the Dpp signal at many stages of the pathway have been described. Here, we discuss the nature of the ovarian Dpp signal and review the catalogue of mechanisms that regulate it, demonstrating how the exquisite modulation of Dpp signalling in this context can result in precise and robust control of stem-cell fate. This modulation is applicable to other stem-cell environments that use BMPs as a niche signal, and the regulatory mechanisms are conceptually relevant to several other stem-cell systems.