The Notch signaling pathway is known to regulate cell fate decisions in a variety of organisms from worms to humans. Although several components of the pathway have been characterized, the actual mechanism and molecular results of signaling remain elusive. We have examined the role of the Notch signaling pathway in the transcriptional regulation of two Drosophila Enhancer of split [E(spl)] genes, whose gene products have been shown to be downstream players in the pathway. Using a reporter assay system in Drosophila tissue culture cells, we have observed a significant induction of E(spl) m gamma and m delta expression after cotransfection with activated Notch. Characterization of the 5' regulatory regions of these two genes led to the identification of a number of target sites for the Suppressor of Hairless [Su(H)] protein, a transcription factor activated by Notch signaling. We show that Notch-inducible expression of E(spl) m gamma and m delta both in cultured cells and in vivo is dependent on functional Su(H). Although overexpression of Su(H) augments the level of induction of the reporter genes by activated Notch, Su(H) alone is insufficient to produce high levels of transcriptional activation. Despite the synergy observed between activated Notch and Su(H), the former affects neither the nuclear localization nor the DNA binding activity of the latter.