Stem cells reside in specialized microenvironments, called niches, that regulate their development and the development of their progeny. However, the development and maintenance of niches are poorly understood. In the Drosophila brain, cortex glial cells provide a niche that promotes self-renewal and proliferation of neural stem cell-like cells (neuroblasts). In the central brain, neuroblasts and their progeny control post-embryonic morphogenesis of cortex glia through PDGF-like ligands, and this PDGFR receptor tyrosine kinase (RTK) signaling in cortex glia is required for expression of DE-cadherin, which sustains neuroblasts. Thus, through an RTK-dependent feed-forward loop, neuroblasts and their glial niche actively maintain each other. When the EGFR RTK is constitutively activated in cortex glia, they overexpress PDGF orthologs to stimulate autocrine PDGFR signaling, which uncouples their growth and survival from neuroblasts, and drives neoplastic glial transformation and elimination of neuroblasts. These results provide fundamental insights into glial development and niche regulation, and show that niche-neural stem cell feed-forward signaling becomes hijacked to drive neural tumorigenesis.