The mechanisms that modulate and limit the signaling output of adult stem cell niches remain poorly understood. To gain further insights into how these microenvironments are regulated in vivo, we performed a candidate gene screen designed to identify factors that restrict BMP signal production to the cap cells that comprise the germline stem cell (GSC) niche of Drosophila ovaries. Through these efforts, we found that disruption of Wnt4 and components of the canonical Wnt pathway results in a complex germ cell phenotype marked by an expansion of GSC-like cells, pre-cystoblasts and cystoblasts in young females. This phenotype correlates with an increase of decapentaplegic (dpp) mRNA levels within escort cells and varying levels of BMP responsiveness in the germline. Further genetic experiments show that Wnt4, which exhibits graded expression in somatic cells of germaria, activates the Wnt pathway in posteriorly positioned escort cells. The activation of the Wnt pathway appears to be limited by the BMP pathway itself, as loss of Mad in escort cells results in the expansion of Wnt pathway activation. Wnt pathway activity changes within germaria during the course of aging, coincident with changes in dpp production. These data suggest that mutual antagonism between the BMP and Wnt pathways in somatic cells helps to regulate germ cell differentiation.