The Serrate and Delta genes of Drosophila encode two transmembrane proteins that act as ligands for the Notch receptor. Both have been shown to promote Notch activity during wing development and the specification of cell fate during neurogenesis. This observation has led to the suggestion that Serrate and Delta are functionally equivalent ligands for Notch. In this study we compare the activities of these proteins during wing development. Our results show that Serrate can activate or inactivate Notch in a concentration-dependent manner. While the inactivation is likely to be mediated by a dominant negative effect over Notch, the activation is similar to that elicited by Delta and requires the product of the Suppressor of Hairless gene. These results indicate that regulation of the concentration of Serrate during development must be an important way of regulating its activity.