During neurogenesis in Drosophila both neurons and nonneuronal cells are produced from a population of initially equivalent cells. The kuzbanian (kuz) gene described here is essential for the partitioning of neural and nonneuronal cells during development of both the central and peripheral nervous systems in Drosophila. Mosaic analyses indicated that kuz is required for cells to receive signals inhibiting the neural fate. These analyses further revealed that the development of a neuron requires a kuz-mediated positive signal from neighboring cells. The kuz gene encodes a metalloprotease-disintegrin protein with a highly conserved bovine homolog, raising the possibility that kuz homologs may act in similar processes during mammalian neurogenesis.