Stem cell homeostasis in plant shoot meristems requires tight coordiantion between stem cell proliferation and cell differentiation. In Arabidopsis, stem cells express the secreted dodecapeptide CLAVATA3 (CLV3), which signals through the leucine-rich repeat (LRR)–receptor kinase CLAVATA1 (CLV1) and related CLV1-family members to downregulate expression of the homeodomain transcription factor WUSCHEL ( WUS ). WUS protein moves from cells below the stem cell domain to the meristem tip and promotes stem cell identity, together with CLV3 expression, generating a negative feedback loop. How stem cell activity in the meristem centre is coordinated with organ initiation and cell differentiation at the periphery is unknown. We show here that the CLE40 gene, encoding a secreted peptide closely related to CLV3, is expressed in the SAM in differentiating cells in a pattern complementary to that of CLV3 . CLE40 promotes WUS expression via BAM1, a CLV1-family receptor, and CLE40 expression is in turn repressed in a WUS -dependent manner. Together, CLE40-BAM1-WUS establish a second negative feedback loop. We propose that stem cell homeostasis is achieved through two intertwined pathways that adjust WUS activity and incorporate information on the size of the stem cell domain, via CLV3-CLV1 , and on cell differentiation via CLE40-BAM1 .