Notch receptors function in highly conserved intercellular signalling pathways that direct cell-fate decisions, proliferation and apoptosis in metazoans. Fringe proteins can positively and negatively modulate the ability of Notch ligands to activate the Notch receptor. Here we establish the biochemical mechanism of Fringe action. Drosophila and mammalian Fringe proteins possess a fucose-specific beta1,3 N-acetylglucosaminyltransferase activity that initiates elongation of O-linked fucose residues attached to epidermal growth factor-like sequence repeats of Notch. We obtained biological evidence that Fringe-dependent elongation of O-linked fucose on Notch modulates Notch signalling by using co-culture assays in mammalian cells and by expression of an enzymatically inactive Fringe mutant in Drosophila. The post-translational modification of Notch by Fringe represents a striking example of modulation of a signalling event by differential receptor glycosylation and identifies a mechanism that is likely to be relevant to other signalling pathways.