In many adult stem cell lineages, the continuous production of functional differentiated cells depends on the maintenance of progenitor cells in an undifferentiated and proliferative state, as well as the subsequent commitment to proper terminal differentiation. In the Drosophila male germline stem cell (GSC) lineage, a key differentiation factor, Bag of marbles (Bam), is required for the transition from proliferative spermatogonia to differentiating spermatocytes. We show that bam mRNA, but not Bam, is present in spermatocytes, suggesting that bam is regulated post-transcriptionally. Consistent with this, repression of Bam accumulation is achieved by microRNAs via the bam 3'UTR. When the bam 3'UTR was substituted with the 3'UTR of a constitutively expressed α-Tubulin, Bam became stabilized in spermatocytes. Moreover, such a persistent expression of Bam in spermatocytes was recapitulated by specifically mutating the putative miR-275/miR-306 recognition site at the bam 3'UTR. In addition, overexpression of miR-275 or miR-306 in spermatogonial cells resulted in a delay of the proliferation-to-differentiation transition and resembled the bam loss-of-function phenotype, suggesting that these microRNAs are sufficient to downregulate Bam. Finally, the failure of Bam downregulation in spermatocytes affected spermatid terminal differentiation and resulted in increased male sterility. Our results demonstrate that microRNAs control the stem cell differentiation pathway through regulating Bam, the downregulation of which is crucial for proper spermatid terminal differentiation.