Yb regulates the proliferation of both germline and somatic stem cells in the Drosophila melanogaster ovary by activating piwi and hh expression in niche cells. In this study, we show that Yb protein is localized as discrete cytoplasmic spots exclusively in the somatic cells of the ovary and testis. These spots, which are different from all known cytoplasmic structures in D. melanogaster, are evenly electron-dense spheres 1.5 microm in diameter (herein termed the Yb body). The Yb body is frequently associated with mitochondria and a less electron-dense sphere of similar size that appears to be RNA rich. There are one to two Yb bodies/cell, often located close to germline cells. The N-terminal region of Yb is required for hh expression in niche cells, whereas the C-terminal region is required for localization to Yb bodies. The entire Yb protein is necessary for piwi expression in niche cells. A double mutant of Yb and a novel locus show male germline loss, revealing a function for Yb in male germline stem cell maintenance.