Mutations in the third chromosome gene Serrate are shown to display genetic interactions with specific alleles of the neurogenic locus Notch, which encodes a transmembrane protein with epidermal growth factor (EGF) homology. Embryonic lethal Serrate mutations exhibit epidermal and neuronal defects, which are reminiscent of those produced by mutations in the Drosophila EGF receptor homolog gene. We present the molecular cloning of Serrate and show that it encodes two coordinately expressed transcripts from a genomic interval greater than 30 kb in length. The deduced protein product of 1404 amino acids contains a single transmembrane domain and 14 EGF-like repeats. Thus, Serrate represents another member of the group of EGF-containing loci in Drosophila. Whole-mount in situ hybridization analysis reveals complex temporal and spatial patterns of RNA expression consistent with the epidermal and neuronal defects observed in mutant embryos. Finally, we discuss the implications of Serrate function within the context of other cell-surface molecules known to be involved in the differentiation of ectodermally derived tissues.