The mechanisms of stem cell niche formation are largely unknown. Lai et al. show that proper formation of the Drosophila melanogaster adult ovarian germline stem cell niche requires a Hedgehog gradient, signaling through a Ci–Traffic Jam–E-cadherin regulatory axis, to direct segregation of intermingled cells by differential cell affinity.

SummaryIn developing organisms, proper tuning of the number of stem cells within a niche is critical for the maintenance of adult tissues; however, the involved mechanisms remain largely unclear. Here, we demonstrate that Thickveins (Tkv), a type I bone morphogenetic protein (BMP) receptor, acts in the Drosophila developing ovarian soma through a Smad-independent pathway to shape the distribution of BMP signal within the niche, impacting germline stem cell (GSC) recruitment and maintenance. Somatic Tkv promotes Egfr signaling to silence transcription of Dally, which localizes BMP signals on the cell surface. In parallel, Tkv promotes Hh signaling, which promotes escort cell cellular protrusions and upregulates expression of the Drosophila BMP homolog, Dpp, forming a positive feedback loop that enhances Tkv signaling and strengthens the niche boundary. Our results reveal a role for non-canonical BMP signaling in the soma during GSC establishment and generally illustrate how complex, cell-specific BMP signaling mediates niche-stem cell interactions.