Notch is a membrane bound transcription factor and it plays fundamental roles in many cell-cell interaction events usually involving directly neighboring cells relating an extrinsic signal of a sending cell to the nucleus of the receiving cell to modulate gene expression patterns in this cell. Notch regulates cell fate specification, cell proliferation as well as cell death in the contexts of many organs and cell types. Although the mechanisms of signal transduction from the cell surface to the nucleus are relatively simple, it is not fully understood how such a straightforward pathway can result in tremendously complex outcomes at the cellular level. This chapter discusses some of the known roles of Notch during central nervous system development in Drosophila. In the CNS, Notch is a major player in creating cellular diversity on the level of binary cell fates by possibly activating differential gene expression in sibling cells arising through asymmetric cell division. This chapter also raises some questions related to Notch function during neural cell fate specification which have not yet been satisfactorily addressed in the field. Finding answers to these questions may provide further insights into how cell-cell interactions in the nervous system involving Notch control the generation of cellular diversity.