Recent studies of inner ear development suggest that hair cells and support cells arise within a common equivalence group by cell-cell interactions mediated by Delta and Notch proteins. We have extended these studies by analyzing the effects of a mutant allele of the zebrafish deltaA gene, deltaA(dx2), which encodes a dominant-negative protein. deltaA(dx2/dx2)homozygous mutants develop with a 5- to 6-fold excess of hair cells and a severe deficiency of support cells. In addition, deltaA(dx2/dx2) mutants show an increased number of cells expressing pax2.1 in regions where hair cells are normally produced. Immunohistological analysis of wild-type and deltaA(dx2/dx2) mutant embryos confirmed that pax2.1 is expressed during the initial stages of hair cell differentiation and is later maintained at high levels in mature hair cells. In contrast, pax2.1 is not expressed in support cells. To address the function of pax2.1, we analyzed hair cell differentiation in no isthmus mutant embryos, which are deficient for pax2.1 function. no isthmus mutant embryos develop with approximately twice the normal number of hair cells. This neurogenic defect correlates with reduced levels of expression of deltaA and deltaD in the hair cells in no isthmus mutants. Analysis of deltaA(dx2/dx2); no isthmus double mutants showed that no isthmus suppresses the deltaA(dx2) phenotype, probably by reducing levels of the dominant-negative mutant protein. This interpretation was supported by analysis of T(msxB)(b220), a deletion that removes the deltaA locus. Reducing the dose of deltaA(dx2) by generating deltaA(dx2)/T(msxB)(b220)trans-heterozygotes weakens the neurogenic effects of deltaA(dx2), whereas T(msxB)(b220) enhances the neurogenic defects of no isthmus. mind bomb, another strong neurogenic mutation that may disrupt reception of Delta signals, causes a 10-fold increase in hair cell production and is epistatic to both no isthmus and deltaA(dx2). These data indicate that deltaA expressed by hair cells normally prevents adjacent cells from adopting the same cell fate, and that pax2.1 is required for normal levels of Delta-mediated lateral inhibition.