In Drosophila melanogaster, the germline precursor cells, i.e. pole cells, are formed at the posterior of the embryo. As observed for newly formed germ cells in many other eukaryotes, the pole cells are distinguished from the soma by their transcriptional quiescence. To learn more about the mechanisms involved in establishing quiescence, we ectopically expressed a potent transcriptional activator, Bicoid (Bcd), in pole cells. We find that Bcd overrides the machinery that downregulates transcription, and activates not only its target gene hunchback but also the normally female specific Sex-lethal promoter, Sxl-Pe, in the pole cells of both sexes. Unexpectedly, the terminal pathway gene torso-like is required for Bcd-dependent transcription. However, terminal signaling is known to be attenuated in pole cells, and this raises the question of how this is accomplished. We present evidence indicating that polar granule component (pgc) is required to downregulate terminal signaling in early pole cells. Consistently, pole cells compromised for pgc function exhibit elevated levels of activated MAP kinase and premature transcription of the target gene tailless (tll). Furthermore, pgc is required to establish a repressive chromatin architecture in pole cells.