In the Drosophila testis, developing germ cells are encapsulated by somatic support cells throughout development. Soma-germline interactions are essential for successful spermiogenesis. However, it is still not fully understood what signaling events take place between the soma and the germline. In this study, we found that a Bone Morphogenetic Protein (BMP) ligand, Glass bottom boat (Gbb), secreted from somatic cyst cells (CCs), signals to differentiating germ cells to maintain proper spermiogenesis. Knockdown of Gbb in CCs or the type I BMP receptor Saxophone (Sax) in germ cells leads to a defect in sperm head bundling and decreased fertility. Our Transmission Electron Microscopy (TEM) analyses revealed that the mutant germ cells have aberrant morphology of mitochondria throughout the stages of spermiogenesis and exhibit a defect in nebenkern formation. Elongating spermatids show uncoupled nuclei and elongating mitochondrial derivatives, suggesting that improper mitochondrial development may cause sperm bundling defects. Taken together, we propose a new role of soma-derived BMP signaling, which is essential for spermiogenesis.