Tissue replenishment from stem cells follows a precise cascade of events, during which stem cell daughters first proliferate by mitotic transit amplifying divisions and then enter terminal differentiation. Here we address how stem cell daughters are guided through the early steps of development. In Drosophila testes, somatic cyst cells enclose the proliferating and differentiating germline cells and the units of germline and surrounding cyst cells are commonly referred to as cysts. By characterizing flies with reduced or increased Epidermal Growth Factor (EGF) signaling we show that EGF triggers different responses in the cysts dependent on its dose. In addition to the previously reported requirement for EGF signaling in cyst formation, a low dose of EGF signaling is required for the progression of the germline cells through transit amplifying divisions, and a high dose of EGF signaling promotes terminal differentiation. Terminal differentiation was promoted in testes expressing a constitutively active EGF Receptor (EGFR) and in testes expressing both a secreted EGF and the EGFR in the cyst cells, but not in testes expressing either only EGF or only EGFR. We propose that as the cysts develop, a temporal signature of EGF signaling is created by the coordinated increase of both the production of active ligands by the germline cells and the amount of available receptor molecules on the cyst cells.