Early oogenesis in Drosophila, with a stereotypic pattern of germ cell division and differentiation, provides an attractive model for studying cell lineage and patterning. Drosophila oogenesis is initiated when a germline stem cell divides asymmetrically to produce a daughter stem cell and a cytoblast. The cystoblast then undergoes four rounds of incomplete mitoses to form a 16-cell cyst, accompanied by the formation of the fusome. Within the cyst, one of the two cells with four intercellular bridges differentiates into an oocyte while the rest become nurse cells. The oocyte then translocates within the cyst to a posterior position, which defines the anterio-posterior axis of the future embryo. Recent studies have shown that the asymmetric germline stem cell division is controlled by somatic signaling involving piwi, fs(1)Yb, and the dpp pathway as well as by intrinsic mechanisms involving pumilio, nanos, arrest, bag-of-marbles, and the spectrosome-the fusome precursor in the stem cells and the cystoblast. The spectrosome in the cystoblast appears to play an important role in polarized fusome growth during cyst formation. The fusome may guide the formation of a polarized microtubule network for the intracyst transport of certain RNAs and proteins to the cystocyte destined to become the oocyte. Genes such as egalitarian, Bicaudal D, stonewall, and encore are important for oocyte determination, while differential adhesion between the oocyte and its surrounding prefollicle cells, as mediated by armadillo, alpha-catenin, shotgun, and the spindle genes, is crucial for oocyte translocation. Early oogenesis shares many parallel features to early spermatogenesis, although distinct differences are also observed at both the phenomenological and mechanistic levels. The study of oogenesis, progressing at an exciting rate, contributes significantly to our understanding of the mechanisms underlying proliferation, differentiation, and patterning.