We examined the role of Notch signaling on the generation of neurons and glia from neural stem cells by using neurospheres that are clonally derived from neural stem cells. Neurospheres prepared from Dll1(lacZ/lacZ) mutant embryos segregate more neurons at the expense of both oligodendrocytes and astrocytes. This mutant phenotype could be rescued when Dll1(lacZ/lacZ) spheres were grown and/or differentiated in the presence of conditioned medium from wild-type neurospheres. Temporal modulation of Notch by soluble forms of ligands indicates that Notch signaling acts in two steps. Initially, it inhibits the neuronal fate while promoting the glial cell fate. In a second step, Notch promotes the differentiation of astrocytes, while inhibiting the differentiation of both neurons and oligodendrocytes.