Drosophila has a primitive yet effective blood system with three types of haemocytes which function throughout different developmental stages and environmental stimuli. Haemocytes play essential roles in tissue modeling during embryogenesis and morphogenesis, and also in innate immunity. The open circulatory system of Drosophila makes haemocytes ideal signal mediators to cells and tissues in response to events such as infection and wounding. The application of recently developed and sophisticated genetic tools to the relatively simple genome of Drosophila has made the fly a popular system for modeling human tumorigensis and metastasis. Drosophila is now used for screening and investigation of genes implicated in human leukemia and also in modeling development of solid tumors. This second line of research offers promising opportunities to determine the seemingly conflicting roles of blood cells in tumor progression and invasion. This review provides an overview of the signaling pathways conserved in Drosophila during haematopoiesis, haemostasis, innate immunity, wound healing and inflammation. We also review the most recent progress in the use of Drosophila as a cancer research model with an emphasis on the roles haemocytes can play in various cancer models and in the links between inflammation and cancer.