The receptor protein NOTCH and its ligands SERRATE and DELTA are involved in many developmental processes in invertebrates and vertebrates alike. Here we show that the expression of the Serrate and Delta genes patterns the segments of the leg in Drosophila by a combination of their signalling activities. Coincident stripes of Serrate and Delta expressing cells activate Enhancer of split expression in adjacent cells through Notch signalling. These cells form a patterning boundary from which a putative secondary signal leads to the development of leg joints. Elsewhere in the tarsal segments, signalling by DELTA and NOTCH is necessary for the development of non-joint parts of the leg. We propose that these two effects result from different thresholds of NOTCH activation, which are translated into different downstream gene expression effects. We propose a general mechanism for creation of boundaries by Notch signalling.