Stem cells are maintained in vivo by short-range signaling systems in specialized microenvironments called niches, but the molecular mechanisms controlling the physical space of the stem cell niche are poorly understood. In this study, we report that heparan sulfate (HS) proteoglycans (HSPGs) are essential regulators of the germline stem cell (GSC) niches in the Drosophila melanogaster gonads. GSCs were lost in both male and female gonads of mutants deficient for HS biosynthesis. dally, a Drosophila glypican, is expressed in the female GSC niche cells and is responsible for maintaining the GSC niche. Ectopic expression of dally in the ovary expanded the niche area, showing that dally is required for restriction of the GSC niche space. Interestingly, the other glypican, dally-like, plays a major role in regulating male GSC niche maintenance. We propose that HSPGs define the physical space of the niche by serving as trans coreceptors, mediating short-range signaling by secreted factors.