Notch signalling is a fundamental pathway that shapes the developing embryo and sustains adult tissues by direct communication between ligand and receptor molecules on adjacent cells. Among the ligands are two Delta paralogues, DLL1 and DLL4, that are conserved in mammals and share a similar structure and sequence. They activate the Notch receptor partly in overlapping expression domains where they fulfil redundant functions in some processes (e.g. maintenance of the crypt cell progenitor pool). In other processes, however, they appear to act differently (e.g. maintenance of foetal arterial identity) raising the questions of how similar DLL1 and DLL4 really are and which mechanism causes the apparent context-dependent divergence. By analysing mice that conditionally overexpress DLL1 or DLL4 from the same genomic locus (Hprt) and mice that express DLL4 instead of DLL1 from the endogenous Dll1 locus (Dll1Dll4ki), we found functional differences that are tissue-specific: while DLL1 and DLL4 act redundantly during the maintenance of retinal progenitors, their function varies in the presomitic mesoderm (PSM) where somites form in a Notch-dependent process. In the anterior PSM, every cell expresses both Notch receptors and ligands, and DLL1 is the only activator of Notch while DLL4 is not endogenously expressed. Transgenic DLL4 cannot replace DLL1 during somitogenesis and in heterozygous Dll1Dll4ki/+ mice, the Dll1Dll4ki allele causes a dominant segmentation phenotype. Testing several aspects of the complex Notch signalling system in vitro, we found that both ligands have a similar trans-activation potential but that only DLL4 is an efficient cis-inhibitor of Notch signalling, causing a reduced net activation of Notch. These differential cis-inhibitory properties are likely to contribute to the functional divergence of DLL1 and DLL4.