Multiple cancers may arise from within a clonal region of preneoplastic epithelium, a phenomenon termed 'field change'. However, it is not known how field change develops. Here we investigate this question using lineage tracing to track the behaviour of scattered single oesophageal epithelial progenitor cells expressing a mutation that inhibits the Notch signalling pathway. Notch is frequently subject to inactivating mutation in squamous cancers. Quantitative analysis reveals that cell divisions that produce two differentiated daughters are absent from mutant progenitors. As a result, mutant clones are no longer lost by differentiation and become functionally immortal. Furthermore, mutant cells promote the differentiation of neighbouring wild-type cells, which are then lost from the tissue. These effects lead to clonal expansion, with mutant cells eventually replacing the entire epithelium. Notch inhibition in progenitors carrying p53 stabilizing mutations creates large confluent regions of doubly mutant epithelium. Field change is thus a consequence of imbalanced differentiation in individual progenitor cells.