To identify regulators of stem cell lineages, we are focusing on spermatogenesis in Drosophila. In spermatogenesis, each germline stem cell divides asymmetrically, renewing itself and producing a transiently amplifying daughter, which divides four times. By screening for mutants in which daughter cells fail to stop dividing, we find that the TGF-beta signal transducers schnurri and punt are required to limit transient amplification of germ cells. Mosaic analysis demonstrates that punt and schnurri act within somatic cyst cells that surround germ cells, rather than in germ cells. Thus, a cyst-cell-derived signal restricts germ cell proliferation and this signal is initiated by input from a member of the TGF-beta superfamily. Thus, a signal relay regulates progression through the germline stem cell lineage.