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Germline stem cell development and differentiation is tightly controlled by the surrounding somatic cells of the stem cell niche. In Drosophila females, cells of the niche emit various signals including Dpp and Wg to balance stem cell renewal and differentiation. Here, we show that the gene pzg is autonomously required in cells of the germline to sustain the interplay between niche and stem cells. Loss of pzg impairs stem cell differentiation and provokes the death of cells in the germarium. As a consequence of pzg loss, increased growth signalling activity predominantly of Dpp and Wg/Wnt, was observed, eventually disrupting the balance of germ cell self-renewal and differentiation. Whereas in the soma, apoptosis-induced compensatory growth is well established, the induction of self-renewal signals during oogenesis cannot compensate for dying germ cells, albeit inducing a new niche-like microenvironment. Instead, they impair the further development of germ cells and cause in addition a forward and feedback loop of cell death.