During Drosophila development, transcriptional activation of genes of the Enhancer of split Complex (E(spl)-C) is a major response to cell-cell signaling via the Notch (N) receptor. Although the structure and function of the E(spl)-C have been studied intensively during the past decade, these efforts have focused heavily on seven transcription units that encode basic helix-loop-helix (bHLH) repressors; the non-bHLH members of the complex have received comparatively little attention. In this report, we analyze the structure, regulation and activity of the m1, m2 and m6 genes of the E(spl)-C. We find that E(spl)m2 and E(spl)m6 encode divergent members of the Bearded (Brd) family of proteins, bringing to four (m(alpha), m2, m4 and m6) the number of Brd family genes in the E(spl)-C. We demonstrate that the expression of both m2 and m6 is responsive to N receptor activity and that both genes are apparently direct targets of regulation by the N-activated transcription factor Suppressor of Hairless. Consistent with this, both are expressed specifically in multiple settings where N signaling takes place. Particularly noteworthy is our finding that m6 transcripts accumulate both in adult muscle founder cells in the embryo and in a subset of adepithelial (muscle precursor) cells associated with the wing imaginal disc. We show that overexpression of either m2 or m6 interferes with N-dependent cell fate decisions in adult PNS development. Surprisingly, while misexpression of m6 impairs lateral inhibition, overexpression of m2 potentiates it, suggesting functional diversification within the Brd protein family. Finally, we present our initial studies of the structure, expression and regulation of the newest member of the Brd gene family, Ocho, which is located in the recently identified Bearded Complex.