The Notch gene of Drosophila plays an important role in cell fate specification throughout development. To investigate the functions of specific structural domains of the Notch protein in vivo, a series of deletion mutants have been ectopically expressed under the hsp70 heat shock promoter. Two classes of dominant phenotypes are observed, one suggestive of Notch loss-of-function mutations and the other of Notch gain-of-function mutations. Dominant activated phenotypes result from overexpression of a protein lacking most extracellular sequences, while dominant negative phenotypes result from overexpression of a protein lacking most intracellular sequences. These results support the notion that Notch functions as a receptor whose extracellular domain mediates ligand binding, resulting in the transmission of developmental signals by the cytoplasmic domain. Finally, the phenotypes observed suggest that the cdc 10/ankyrin repeat region within the intracellular domain plays an essential role in the postulated signal transduction events.