Germline stem cells (GSCs) are the progenitor cells of the germline for the lifetime of an animal. In Drosophila, these cells reside in a cellular niche that is required for both their maintenance (self-renewal) and differentiation (asymmetric division resulting in a daughter cell that differs from the GSC). The stem cell-daughter cell transition is tightly regulated by a number of processes, including an array of proteins required for genome stability. The germline stem-cell maintenance factor Stonewall (Stwl) associates with heterochromatin, but its molecular function is poorly understood. We performed RNA-Seq on stwl mutant ovaries and found significant derepression of many transposon families but not heterochromatic genes. We also discovered inappropriate expression of multiple classes of genes. Most prominent are testis-enriched genes, including the male germline sex-determination switch Phf7, the differentiation factor bgcn, and a large testis-specific gene cluster on chromosome 2, all of which are upregulated or ectopically expressed in stwl mutant ovaries. Surprisingly, we also found that RNAi knockdown of stwl in somatic S2 cells results in ectopic expression of these testis genes. Using parallel ChIP-Seq and RNA-Seq experiments in S2 cells, we discovered that Stwl localizes upstream of transcription start sites and at heterochromatic sequences including repetitive sequences associated with telomeres. Stwl is also enriched at bgcn, suggesting that it directly regulates this essential differentiation factor. Finally, we identify Stwl binding motifs that are shared with known insulator binding proteins. We propose that Stwl affects gene regulation, including repression of male transcripts in the female germline, by binding insulators and establishing chromatin boundaries.