Despite the importance of precisely regulating stem cell division, the molecular basis for this control is still elusive. Here, we show that surface glia in the developing Drosophila brain play essential roles in regulating the proliferation of neural stem cells, neuroblasts (NBs). We found that two classes of extracellular factors, Dally-like (Dlp), a heparan sulfate proteoglycan, and Glass bottom boat (Gbb), a BMP homologue, are required for proper NB proliferation. Interestingly, Dlp expressed in perineural glia (PG), the most outer layer of the surface glia, is responsible for NB proliferation. Consistent with this finding, functional ablation of PG using a dominant-negative form of dynamin showed that PG has an instructive role in regulating NB proliferation. Gbb acts not only as an autocrine proliferation factor in NBs but also as a paracrine survival signal in the PG. We propose that bidirectional communication between NBs and glia through TGF-β signaling influences mutual development of these two cell types. We also discuss the possibility that PG and NBs communicate via direct membrane contact or transcytotic transport of membrane components. Thus, our study shows that the surface glia acts not only as a simple structural insulator but also a dynamic regulator of brain development.