The Drosophila eye, a paradigm for epithelial organization, is highly polarized with mirror-image symmetry about the equator. The R3 and R4 photoreceptors in each ommatidium are vital in this polarity; they adopt asymmetrical positions in adult ommatidia and are the site of action for several essential genes(1-5). Two such genes are frizzled (fz) and dishevelled (dsh), the products of which are components of a signalling pathway required in R3, and which are thought to be activated by a diffusible signal(3,6-10). Here we show that the transmembrane receptor Notch is required downstream of dsh in R3/R4 for them to adopt distinct fates, By using an enhancer for the Notch target gene Enhancer of split m delta, we show that Notch becomes activated specifically in R4, We propose that Fz/Dsh promotes activity of the Notch ligand Delta and inhibits Notch receptor activity in R3, creating a difference in Notch signalling capacity between R3 and R4. Subsequent feedback in the Notch pathway ensures that this difference becomes amplified. This interplay between Fz/Dsh and Notch indicates that polarity is established through local comparisons between two cells and explains how a signal from one position (for example, the equator in the eye) could be interpreted by all ommatidia in the field.