The posterior lateral line primordium (pLLp) migrates caudally, depositing neuromasts to establish the posterior lateral line system in zebrafish. A Wnt-dependent FGF signaling center at the leading end of the pLLp initiates the formation of `proneuromasts' by facilitating the reorganization of cells into epithelial rosettes and by initiating atoh1a expression. Expression of atoh1a gives proneuromast cells the potential to become sensory hair cells, and lateral inhibition mediated by Delta-Notch signaling restricts atoh1a expression to a central cell. We show that as atoh1a expression becomes established in the central cell, it drives expression of fgf10 and of the Notch ligand deltaD, while it inhibits expression of fgfr1. As a source of Fgf10, the central cell activates the FGF pathway in neighboring cells, ensuring that they form stable epithelial rosettes. At the same time, DeltaD activates Notch in neighboring cells, inhibiting atoh1a expression and ensuring that they are specified as supporting cells. When Notch signaling fails, unregulated atoh1a expression reduces Fgfr1 expression, eventually resulting in attenuated FGF signaling, which prevents effective maturation of epithelial rosettes in the pLLp. In addition, atoh1a inhibits e-cadherin expression, which is likely to reduce cohesion and contribute to fragmentation of the pLLp. Together, our observations reveal a genetic regulatory network that explains why atoh1a expression must be restricted by Notch signaling for effective morphogenesis of the pLLp.