The niche controls stem cell self-renewal and differentiation in animal tissues. Although the exocyst is known to be important for protein membrane trafficking and secretion, its role in stem cells and niches has never been reported. Here, this study shows that the exocyst functions in the niche to promote germline stem cell (GSC) progeny differentiation in the Drosophila ovary by directly regulating EGFR membrane trafficking and signaling. Inactivating exocyst components in inner germarial sheath cells, which form the differentiation niche, causes a severe GSC differentiation defect. The exocyst is required for maintaining niche cells and preventing BMP signaling in GSC progeny by promoting EGFR membrane targeting and signaling through direct association with EGFR. Finally, it is also required for EGFR membrane targeting, recycling and signaling in human cells. Therefore, this study has revealed a novel function of the exocyst in niche cells to promote stem cell progeny differentiation by directly controlling EGFR membrane trafficking and signaling in vivo, and has also provided important insight into how the niche controls stem cell progeny differentiation at the molecular level.