SUMMARY Adult stem cells provide a renewable source of differentiated cells for a wide variety of tissues and generally give rise to multiple cell types. Basic principles of stem cell organization and regulation underlying this behavior are emerging. Local niche signals maintain stem cells, while different sets of signals act outside the niche to diversify initially equivalent stem cell progeny. Here we show that Drosophila ovarian Follicle Stem Cells (FSCs) produced two distinct cell types directly. This cell fate choice was determined by the A/P position of an FSC and by the magnitude of spatially graded Wnt pathway activity. These findings reveal a paradigm of immediate diversification of stem cell derivatives according to stem cell position within a larger population, guided by a graded niche signal. We also found that FSCs strongly resemble mammalian intestinal stem cells in many aspects of their organization, including population asymmetry and dynamic heterogeneity.