The Hippo pathway is conserved and plays important roles in organ size control. The core components of the Hippo pathway are two kinases Hippo (Hpo), Warts (Wts), and a transcription-co-activator Yorkie (Yki). Yki activity is regulated by phosphorylation, which affects its nuclear localization and stability. To determine the role of the Hippo pathway in stem cells, we examine follicle stem cells (FSCs) in the Drosophila ovary. Yki is detected in the nucleus of FSCs. Knockdown of yki in the follicle cell lineage leads to a disruption of the follicular epithelium. Mitotic clones of FSCs mutant for hpo or wts are maintained in the niche and tend to replace the other FSCs, and FSCs mutant for yki are rapidly lost, demonstrating that the Hippo pathway is both required and sufficient for FSC maintenance. Using genetic interaction analyses, we demonstrate that the Hedgehog pathway acts upstream of the Hippo pathway in regulating FSC maintenance. The nuclear localization of Yki is enhanced when the Hedgehog signaling is activated. Furthermore, a constitutively active but not a wild-type Yki promotes FSC maintenance as activation of the Hedgehog signaling does, suggesting that the Hedgehog pathway regulates Yki through a post-translational mechanism in maintaining FSCs.