Maintenance and differentiation of progenitor cells is essential for proper organ development and adaptation to environmental stress and injury. In Drosophila melanogaster, the haematopietic system serves as an ideal model for interrogating the function of signaling pathways required for progenitor maintenance and cell fate determination. Here we focus on the role of the Hippo pathway effectors Yorkie and Scalloped in mediating and facilitating Notch signaling-mediated lineage specification in the lymph gland, the primary center for haematopoiesis within the developing larva. We discuss the regulatory mechanisms which promote Notch activity during normal haematopoiesis and its modulation during immune challenge conditions. We provide additional evidence establishing the hierarchy of signaling events during crystal cell formation, highlighting the relationship between Yorkie, Scalloped and Lozenge, while expanding on the role of Yorkie in promoting hemocyte survival and the developmental regulation of Notch and its ligand, Serrate, within the lymph gland. Finally, we propose additional areas of exploration that may provide mechanistic insight into the environmental and non-cell autonomous regulation of cell fate in the blood system.