The hematopoietic niche is crucial for maintenance of homeostasis and the blood stem cell population. While miRNAs have been shown to be vital for normal blood development and play a role in cancers of the blood, relatively little is known about miRNAs in the blood stem cell niche in regards to what miRNAs are important, what their targets are and what pathways they operate in. The work of this dissertation advantageously employs Drosophila as a model to better understand the role miRNAs play in the intricate relationship between hematopoietic progenitors and their supportive niche, and how aberrant signaling causes this system to result in hematopoietic malignancy. I demonstrate that bantam miRNA is an essential positive regulator of growth endogenously active in the blood stem cell-like niche, whose loss leads to severe niche reduction. Bantam facilitates growth through targeting of a negative regulator of cell proliferation, which I have determined to be suppressor of cytokine signaling at 36E (SOCS36E). Additionally I show that the evolutionarily conserved Epidermal Growth Factor Receptor (EGFR), whose aberrant activation has been previously correlated with human cancers, is vital for niche maintenance. Under conditions of elevated EGFR, SOCS36E, similar to its human homolog SOCS5, acts as a tumor suppressor, consequently leading to suppression of the expanded niche phenotype. Importantly, bantam is able to relieve this inhibition to enable massive niche overgrowth. Taken together, this signifies novel roles for bantam, SOCS36E, and EGFR in the PSC and provide a mechanism and pathway in which bantam operates during blood development. These findings support the study of miRNAs as a promising approach for further discovery of genes related to tumor suppression or oncogenesis during blood development and a means through which to gain valuable insights into the factors that cooperate to maintain proper hematopoietic homeostasis. Lastly, during the study of blood cell lineages in Drosophila, I created a novel tool for developmental biologists. M2(H37A)-mediated ablation can be used for determining the interdependent relationships between cell populations during development that can be applied to not just the blood system but any cell linage within the organism.