Many stem cell niches contain support cells that increase contact with stem cells by enwrapping them in cellular processes. One example is the germ stem cell niche in C. elegans, which is composed of a single niche cell termed the distal tip cell (DTC) that extends cellular processes, constructing an elaborate plexus that enwraps germ stem cells. To identify genes required for plexus formation and to explore the function of this specialized enwrapping behavior, a series of targeted and tissue-specific RNAi screens were performed. Here we identify genes that promote stem cell enwrapment by the DTC plexus, including a set that specifically functions within the DTC, such as the chromatin modifier lin-40/MTA1, and others that act within the germline, such as the 14-3-3 signaling protein par-5. Analysis of genes that function within the germline to mediate plexus development reveal that they are required for expansion of the germ progenitor zone, supporting the emerging idea that germ stem cells signal to the niche to stimulate enwrapping behavior. Examination of wild-type animals with asymmetric plexus formation and animals with reduced DTC plexus elaboration via loss of two candidates including lin-40 indicate that cellular enwrapment promotes GLP-1/Notch signaling and germ stem cell fate. Together, our work identifies novel regulators of cellular enwrapment and suggests that reciprocal signaling between the DTC niche and the germ stem cells promotes enwrapment behavior and stem cell fate.