The body axes of Drosophila are established during oogenesis through reciprocal interactions between the germ line cells and the somatic follicle cells that surround them. The Notch pathway is required at two stages in this process: first, for the migration of the follicle cells around the germ line cyst and, later, for the polarization of the anterior-posterior (A-P) axis of the oocyte. Its function in these events, however, has remained controversial. Using clonal analysis, we show that Notch signaling controls cell proliferation and differentiation in the whole follicular epithelium. Notch mutant follicle cells remain in a precursor state and fail to switch from the mitotic cell cycle to the endocycle. Furthermore, removal of Delta from the germ line produces an identical phenotype, showing that Delta signals from the germ cells to control the timing of follicle cell differentiation. This explains the axis formation defects in Notch mutants, which arise because undifferentiated posterior follicle cells cannot signal to polarize the oocyte. Delta also signals from the germ line to Notch in the soma earlier in oogenesis to control the differentiation of the polar and stalk follicle cells. The germ line therefore regulates the development of the follicle cells through two complementary signaling pathways: Gurken signals twice to control spatial patterning, whereas Delta signals twice to exert temporal control.