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-alpha (TNF-alpha). Notch signaling affected the differentiation of CD1a-CD14+ macrophage/dendritic cell precursors derived in vitro from CD34+ cells. With GM-CSF and TNF-alpha, 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.