XHRT1 is a member of the HRT/Hey protein subfamily that are known as Notch effectors. XHRT1 is expressed in the developing floor plate and encodes a basic helix-loop-helix (bHLH) transcription repressor. Here, we show that XHRT1 misexpression in the neural plate inhibits differentiation of neural precursor cells and thus may be important for floor plate cells to prevent them from adopting a neuronal fate. Deletion analysis indicated that inhibition of differentiation by XHRT1 requires the DNA-binding bHLH motif and either the Orange domain or the C-terminal region. XHRT1 could efficiently homodimerize and heterodimerize with hairy proteins. Among those hairy genes, Xhairy2b shows extensive overlap of expression with XHRT1 in floor plate precursors and may be a biologically relevant XHRT1 partner. Dimerization is mediated through both the bHLH and downstream sequences, the Orange domain being particularly important for the efficiency of the interaction. Using chimeric constructs between XHRT1 and the ESR9 bHLH-O protein that does not interact with Xhairy1 and Xhairy2b, we found that both the bHLH domain and downstream sequences of XHRT1 were required for heterodimerization with Xhairy2b, while only the XHRT1 sequences downstream of the Orange domain are required for the interaction with Xhairy1. Together, these results suggest that XHRT1 plays a role in floor plate cell development and highlight the importance of the Orange and downstream sequences in dimerization and in the selection of the bHLH partners.