Drosophila melanogaster larval hematopoiesis is a well-established model to study mechanisms that regulate hematopoietic niche maintenance and control of blood cell precursor (prohemocyte) differentiation. Molecules that perturb niche function affect the balance between prohemocytes and differentiated hemocytes. The conserved hemocyte-specific endosomal protein Asrij is essential for niche function and prohemocyte maintenance. Elucidating how subcellular trafficking molecules can regulate signaling presents an important challenge. Here we show that Asrij function is mediated by the Ras family GTPase Arf79F, the Drosophila homolog of ADP ribosylation factor 1 (ARF1), essential for clathrin coat assembly, Golgi architecture, and vesicular trafficking. ARF1 is expressed in the larval lymph gland and in circulating hemocytes and interacts with Asrij. ARF1-depleted lymph glands show loss of niche cells and prohemocyte maintenance with increased differentiation. Inhibiting ARF1 activation by knocking down its guanine nucleotide exchange factor (Gartenzwerg) or overexpressing its GTPAse-activating protein showed that ARF1-GTP is essential for regulating niche size and maintaining stemness. Activated ARF1 regulates Asrij levels in blood cells thereby mediating Asrij function. Asrij controls crystal cell differentiation by affecting Notch trafficking. ARF1 perturbation also leads to aberrant Notch trafficking and the Notch intracellular domain is stalled in sorting endosomes. Thus, ARF1 can regulate Drosophila blood cell homeostasis by regulating Asrij endocytic function. ARF1 also regulates signals arising from the niche and differentiated cells by integrating the insulin-mediated and PDGF-VEGF receptor signaling pathways. We propose that the conserved ARF1-Asrij endocytic axis modulates signals that govern hematopoietic development. Thus, Asrij affords tissue-specific control of global mechanisms involved in molecular traffic.