We examined the function of the intracellular domains of the two known Drosophila Notch ligands, Delta and Serrate, by expressing wild-type and mutant forms in the developing Drosophila eye under the sevenless promoter. The expression of intracellularly truncated forms of either Delta (sev-DlTM) or Serrate (sev-SerTM) leads to extra photoreceptor phenotypes, similar to the eye phenotypes associated with loss-of-function mutations of either Notch or Delta. Consistent with the notion that the truncated ligands reduce. Notch signalling activity, the eye phenotypes of sev-DlTM and sev-SerTM are enhanced by loss-of-function mutations in the Notch pathway elements, Notch, Delta, mastermind, deltex and groucho, but are suppressed by a duplication of Delta or mutations in Hairless, a negative regulator of the pathway. These observations were extended to the molecular level by demonstrating that the expression of Enhancer of split m delta, a target of Notch signalling, is down-regulated by the truncated ligands highly expressed in neighbouring cells. We conclude that the truncated ligands act as antagonists of Notch signalling.