During development, Notch activation in one cell can inhibit its ability to make Notch ligands and so activate Notch in its neighbours. This `lateral inhibition' produces mosaics of cells with different fates. However, sometimes Notch activation activates Notch ligand expression in the given cell, thereby driving neighbouring cells into a similar state (lateral induction). Now,Julian Lewis and colleagues report that, during mouse inner ear development,the Notch pathway first uses the Jagged1 (Jag1) ligand to induce prosensory patch formation - from which the sensory cells of the ear develop - and later uses Delta1 (Dll1) to control the formation of different sensory cell types through lateral inhibition (see p. 1277). They show that cochlear hair cells are produced early and in excess when Dll1 is conditionally deleted in the mouse ear, indicating a failure of lateral inhibition. By contrast, conditional Jag1 knockouts have a severe deficit of sensory tissue, indicating that prosensory cell induction has failed. These results provide new insights into inner ear development and the distinct developmental roles of different Notch ligands.