Plant stem cell populations, unlike their animal counterparts, do not use cell migration and oriented cell divisions to maintain their size, and therefore require a precise coordination between self-renewing divisions of stem cells, and rates of cell division and differentiation among stem cell progenitors. Shoot apical meristems (SAMs) of higher plants harbor a set of stem cells within the central zone (CZ) that divide infrequently. Stem cell daughters that are displaced towards the surrounding peripheral zone (PZ) divide at a faster rate and enter into differentiation at specific locations to form leaves or flowers. The relative ratios of cells in the CZ and the PZ are maintained, despite a constant displacement of cells from the CZ into the PZ, and subsequent allocation of cells within the PZ to form organ primordia. The mechanisms that mediate this homeostatic balance are not well understood. A homeodomain transcription factor WUSCHEL, expressed in the rib meristem (RM), located beneath the CZ, has been shown to provide nonautonomous cues for stem cell specification. By employing transient spatial manipulation and live imaging, we show that an elevated level of WUS not only induces expansion of the CZ, but also results in increased cell division rates in cells of the PZ; conversely, decreases in WUS level lead to a smaller CZ and are associated with a reduction in cell division rate. Moreover, low levels of WUS lead to enlarged organ primordia, by elevating the responsiveness of the PZ cells to the plant hormone auxin. This reveals a function of WUS in mediating the balance between differentiating and non-differentiating cells of the PZ. Regulation of stem cell numbers, growth and differentiation patterns by a single transcription factor forms a interconnected and self-correcting feedback loop to provide robustness to stem cell homeostasis in a dynamic cellular environment.