The Notch (N) signaling pathway is involved in a vast number of patterning processes in all metazoans. The regulation of the core N pathway is largely understood, but little is known about fine-tuning modulatory effects. Here, we address the role of Drosophila Krüppel-family Zn-finger transcription factor roughened eye (roe) in the context of N signaling. We demonstrate that during eye patterning, N signaling regulates the expression of roe. In turn, Roe negatively modulates the expression of target genes of N-signaling activation. In the absence of roe function, expression of N target genes is elevated and the resulting phenotypes during patterning of the retina are similar to those of N gain-of-function scenarios. Importantly, our data show that Roe binds regulatory DNA sequences of N target genes of the E(spl)-complex both in vitro and in vivo, independently of Su(H)-DNA interaction. Thus, our data suggest that Roe acts as a transcriptional repressor in a negative-feedback loop of the N pathway.