Notch-mediated cellular interactions are known to regulate cell fate decisions in various developmental systems. A previous report indicated that monocytes express relatively high amounts of Notch-1 and Notch-2 and that the immobilized extracellular domain of the Notch ligand, Delta-1 (Delta^ext-myc), induces apoptosis in peripheral blood monocytes cultured with macrophage colony-stimulating factor (M-CSF), but not granulocyte-macrophage CSF (GM-CSF). The present study determined the effect of Notch signaling on monocyte differentiation into macrophages and dendritic cells. Results showed that immobilized Delta^ext-myc inhibited differentiation of monocytes into mature macrophages (CD1a^+/−CD14^+/− CD64⁺) with GM-CSF. However, Delta^ext-myc permitted differentiation into immature dendritic cells (CD1a⁺CD14⁻CD64⁻) with GM-CSF and interleukin 4 (IL-4), and further differentiation into mature dendritic cells (CD1a⁺CD83⁺) with GM-CSF, IL-4, and tumor necrosis factor-α (TNF-α). Notch signaling affected the differentiation of CD1a⁻CD14⁺macrophage/dendritic cell precursors derived in vitro from CD34⁺ cells. With GM-CSF and TNF-α, exposure to Delta^ext-myc increased the proportion of precursors that differentiated into CD1a⁺CD14⁻ dendritic cells (51% in the presence of Delta^ext-myc versus 10% in control cultures), whereas a decreased proportion differentiated into CD1a⁻CD14⁺ macrophages (6% versus 65%). These data indicate a role for Notch signaling in regulating cell fate decisions by bipotent macrophage/dendritic precursors.