Transposable elements (TE) are mobile genetic parasites whose unregulated activity in the germline causes DNA damage and sterility. In multiple species of Drosophila, P-element transposition in larval primordial germ cells (PGCs), as well as adult germline stem cells (GSCs), leads to the loss of both cell types and in extreme cases: agametic gonads. While much is known about the regulation of P-element transposition by piRNAs, less is known about tolerance factors that could allow PGCs or GSCs to persist in the face of high transposition rates. Using a panel of highly recombinant inbred lines of Drosophila melanogaster, we identified two linked quantitative trait loci (QTL) associated with natural variation in tolerance to P-element transposition. By comparing the total RNA and small RNA pools of multiple tolerant and sensitive genotypes, we found that sensitive genotypes upregulate histones and translational machinery, while tolerant genotypes upregulate chorion proteins. We further observed that sensitive genotypes exhibit increased expression of pericentromeric genes, suggesting reduced heterochromatin formation. Based on these differentially expressed genes and functional classes, location within a QTL, and in-phase single nucleotide polymorphisms (SNPs), we identified two candidate genes that we propose influence tolerance: brat and Nipped-A. Both candidates are known interactors of the tolerance factor myc, a conserved transcription factor whose activity promotes the retention of PGCs that are damaged by P-element transposition. brat is a translational repressor of myc, whereas Nipped-A is a co-factor that promotes the expression of genes involved in stem cell self renewal. Nipped-A also contributes to double-strand break (DSB) repair as a member of the Tat interactive protein 60-kDa (TIP60) complex, which could promote tolerance by repairing damage caused by transposition. Together our findings reveal complex underpinnings to natural variation in tolerance, including the modulated regulation of stem cell maintenance and DNA repair pathways.