Polycomb and Trithorax group (PcG and TrxG) genes function to regulate gene transcription by maintaining a repressive or active chromatin state, respectively. This antagonistic activity is important for body patterning during embryonic development, but whether this function module has a role in adult tissues is unclear. Here, we report that in the Drosophila ovary, disruption of the Polycomb repressive complex 1 (PRC1), specifically in the supporting escort cells, causes blockage of cystoblast differentiation and germline stem cell-like tumor formation. Tumors are caused by derepression of decapentaplegic (dpp), which prevents cystoblast differentiation. Interestingly, activation of dpp in escort cells requires the function of the TrxG gene brahma (brm), suggesting that loss of PRC1 in escort cells causes Brm-dependent dpp expression. Our study suggests a requirement for balanced activity between PcG and TrxG in an adult stem cell niche, and disruption of this balance could lead to the loss of tissue homeostasis and tumorigenesis.