Previous studies have identified roles of the modulation of Notch activation by Fringe homologues in boundary formation and in regulating the differentiation of vertebrate thymocytes and Drosophila glial cells. We have investigated the role of Lunatic fringe (Lfng) expression during neurogenesis in the vertebrate neural tube. We find that in the zebrafish hindbrain, Lfng is expressed by progenitors in neurogenic regions and downregulated in cells that have initiated neuronal differentiation. Lfng is required cell autonomously in neural epithelial cells to limit the amount of neurogenesis and to maintain progenitors. By contrast, Lfng is not required for the role of Notch in interneuronal fate choice, which we show is mediated by Notch1a. The expression of Lfng does not require Notch activity, but rather is regulated downstream of proneural genes that are widely expressed by neural progenitors. These findings suggest that Lfng acts in a feedback loop downstream of proneural genes, which, by promoting Notch activation, maintains the sensitivity of progenitors to lateral inhibition and thus limits further proneural upregulation.