Lateral inhibition is a pattern refining process that generates single neural precursors from a field of equipotent cells and is mediated via Notch signaling. Of the two Notch ligands Delta and Serrate, only the former was thought to participate in this process. We now show that macrochaete lateral inhibition involves both Delta and Serrate. In this context, Serrate interacts with Neuralized, a ubiquitin ligase that was heretofore thought to act only on Delta. Neuralized physically associates with Serrate and stimulates its endocytosis and signaling activity. We also characterize a mutation in mib1, a Drosophila homolog of mind bomb, another Delta-targeting ubiquitin ligase from zebrafish. Mib1 affects the signaling activity of Delta and Serrate in both lateral inhibition and wing dorsoventral boundary formation. Simultaneous absence of neuralized and mib1 completely abolishes Notch signaling in both aforementioned contexts, making it likely that ubiquitination is a prerequisite for Delta/Serrate signaling.