The Drosophila melanogaster larval hematopoietic organ, the lymph gland, is a model to study in vivo the function of the hematopoietic niche. A small cluster of cells in the lymph gland, the posterior signaling center (PSC), maintains the balance between hematopoietic progenitors (prohemocytes) and their differentiation into specialized blood cells (hemocytes). Here, we show that Decapentaplegic/bone morphogenetic protein (Dpp/BMP) signaling activity in PSC cells controls niche size. In the absence of BMP signaling, the number of PSC cells increases. Correlatively, no hemocytes differentiate. Controlling PSC size is, thus, essential for normal blood cell homeostasis. Activation of BMP signaling in the PSC requires expression of the Dally-like heparan-sulfate proteoglycan, under the control of the Collier/early B-cell factor (EBF) transcription factor. A Dpp > dpp autoregulatory loop maintains BMP signaling, which limits PSC cell proliferation by repressing the protooncogene dmyc . Dpp antagonizes activity of wingless (Wg)/Wnt signaling, which positively regulates the number of PSC cells via the control of Dmyc expression. Together, our data show that Collier controls hemocyte homeostasis via coordinate regulation of PSC cell number and PSC signaling to prohemocytes. In mouse, EBF2, BMP, and Wnt signaling in osteoblasts is required for the proper number of niche and hematopoietic stem cells. Our findings bring insights to niche size control and draw parallels between Drosophila and mammalian hematopoiesis.