Interactions between the soma and germline are essential for gametogenesis. In the Drosophila testis, differentiating germ cells are encapsulated by two somatic cells that surround the germline throughout spermatogenesis. chickadee (chic), the fly ortholog of Profilin, mediates soma-germline interactions. Knockdown of Chic in the soma results in sterility and severely disrupted spermatogenesis due to defective encapsulation. To study this defect further, we developed a permeability assay to analyze whether the germline is isolated from the surrounding environment by the soma. We find that germline encapsulation by the soma is, by itself, insufficient for the formation of a permeability barrier, but that such a barrier gradually develops during early spermatogenesis. Thus, germline stem cells, gonialblasts and early spermatogonia are not isolated from the outside environment. By late spermatocyte stages, however, a permeability barrier is formed by the soma. Furthermore, we find that, concomitant with formation of the permeability barrier, septate junction markers are expressed in the soma and localize to junctional sites connecting the two somatic cells that surround the germline. Importantly, knockdown of septate junction components also disrupts the permeability barrier. Finally, we show that germline differentiation is delayed when the permeability barrier is compromised. We propose that the permeability barrier around the germline serves an important regulatory function during spermatogenesis by shaping the signaling events that take place between the soma and the germline.