The receptor protein Notch plays a conserved role in restricting neural-fate specification during lateral inhibition. Lateral inhibition requires the Notch intracellular domain to coactivate Su(H)-mediated transcription of the Enhancer-of-split Complex. During Drosophila eye development, Notch plays an additional role in promoting neural fate independently of Su(H) and E(spl)-C, and this finding suggests an alternative mechanism of Notch signal transduction.We used genetic mosaics to analyze the proneural enhancement pathway. As in lateral inhibition, the metalloprotease Kuzbanian, the EGF repeat 12 region of the Notch extracellular domain, Presenilin, and the Notch intracellular domain were required. By contrast, proneural enhancement became constitutive in the absence of Su(H), and this led to premature differentiation and upregulation of the Atonal and Senseless proteins. Ectopic Notch signaling by Delta expression ahead of the morphogenetic furrow also caused premature differentiation.Proneural enhancement and lateral inhibition use similar ligand binding and receptor processing but differ in the nuclear role of Su(H). Prior to Notch signaling, Su(H) represses neural development directly, not indirectly through E(spl)-C. During proneural enhancement, the Notch intracellular domain overcomes the repression of neural differentiation. Later, lateral inhibition restores the repression of neural development by a different mechanism, requiring E(spl)-C transcription. Thus, Notch restricts neurogenesis temporally to a narrow time interval between two modes of repression.