Mutations at the Notch locus affect the fate of cells in the neurogenic region of the Drosophila embryo so that epidermal precursors become neuroblasts. We have analyzed the cellular requirements for wild-type Notch gene function by means of genetic mosaics, using a cuticle marker to distinguish hypodermal cell genotype. Cells that were genotypically Notch never gave rise to hypoderm within the neurogenic region of mosaic embryos. Mosaic dividing lines within the neurogenic region juxtapose N+ hypoderm with regions of neural hypertrophy. This autonomous action of Notch in hypodermal cells is consistent with a local function of the protein during neurogenesis. Comparison of clone distribution in Notch mosaics and controls suggests that islands of wild-type hypodermal cells fail to differentiate cuticle.