Spermatogenesis relies on the function of germ-line stem cells, as a continuous supply of differentiated spermatids is produced throughout life. In Drosophila, there must also be somatic stem cells that produce the cyst cells that accompany germ cells throughout spermatogenesis. By lineage tracing, we demonstrate the existence of such somatic stem cells and confirm that of germ-line stem cells. The somatic stem cells likely correspond to the ultrastructurally described cyst progenitor cells. The stem cells for both the germ-line and cyst lineage are anchored around the hub of non-dividing somatic cells located at the testis tip. We then address whether germ cells regulate the behavior of somatic hub cells, cyst progenitors and their daughter cyst cells by analyzing cell proliferation and fate in testes in which the germ line has been genetically ablated. Daughter cyst cells, which normally withdraw from the cell cycle, continue to proliferate in the absence of germ cells. In addition, cells from the cyst lineage switch to the hub cell fate. Male-sterile alleles of chickadee and diaphanous, which are deficient in germ cells, exhibit similar cyst cell phenotypes. We conclude that signaling from germ cells regulates the proliferation and fate of cells in the somatic cyst lineage.