Diet is an important regulator of stem cell homeostasis; however, the underlying mechanisms of this regulation are not fully known. Here, we report that insulin signaling mediates dietary maintenance of Drosophila ovarian germline stem cells (GSCs) by promoting the extension of niche escort cell (EC) membranes to wrap around GSCs. This wrapping may facilitate the delivery of bone morphogenetic protein stemness factors from ECs in the niche to GSCs. In addition to the effects on GSCs, insulin signaling-mediated regulation of EC number and protrusions controls the division and growth of GSC progeny. The effects of insulin signaling on EC membrane extension are, at least in part, driven by enhanced translation of Failed axon connections (Fax) via Ribosomal protein S6 kinase. Fax is a membrane protein that may participate in Abelson tyrosine kinase-regulated cytoskeletal dynamics and is known to be involved in axon bundle formation. Therefore, we conclude that dietary cues stimulate insulin signaling in the niche to regulate EC cellular structure, probably via Fax-dependent cytoskeleton remodeling. This mechanism enhances intercellular contact and facilitates homeostatic interactions between somatic and germline cells in response to diet.