Xotch is a Xenopus homolog of Notch, a receptor involved in cell fate decisions in Drosophila. Using an extracellular deletion construct, Xotch delta E, we show that Xotch has a similar role in Xenopus embryos. Broad expression causes the loss of dorsal structures and the expansion and disorganization of the brain. Single blastomere injections of Xotch delta E induce autonomous neural and mesodermal hypertrophy, even in the absence of cell division. Xotch delta E inhibits the early expression of epidermal and neural crest markers yet enhances and extends the response of animal caps to mesodermal and neural induction. Our data suggest a mechanism for the function of Notch homologs in which they delay differentiation and leave undetermined cells competent to respond to later inductive signals.