The Drosophila gene Serrate encodes a transmembrane protein with 14 epidermal growth factor-(EGF)-like repeats in its extracellular portion. It has been suggested to act as a signal in the developing wing from the dorsal side to induce the organising centre at the dorsal/ventral compartment boundary, which is required for growth and patterning of the wing. Ectopic expression of Serrate during wing development induces ectopic outgrowth of ventral wing tissue and the formation of an additional wing margin. Here we present data to suggest that both events are mediated by genes that are required for normal wing development, including Notch as receptor. In order for Serrate to elicit these responses the concomitant expression of wingless seems to be required. The lack of wings in flies devoid of Serrate function can be partially restored by Gal4-mediated expression of Serrate, whilst expression of wingless is not sufficient. Ectopic expression of Delta, which encodes a structurally very similar transmembrane protein with EGF-like repeats, provokes wing outgrowth and induction of a new margin under all conditions tested here, both on the dorsal and ventral side. Our data further suggest that Serrate can act as an activating ligand for the Notch receptor only under certain circumstances; it inhibits Notch function under other conditions.