Notch-mediated lateral inhibition regulates binary cell-fate choice, resulting in salt-and-pepper patterns during various developmental processes. However, how Notch signaling behaves in combination with other signaling systems remains elusive. The wave of differentiation in the Drosophila visual center or 'proneural wave' accompanies Notch activity that is propagated without the formation of a salt-and-pepper pattern, implying that Notch does not form a feedback loop of lateral inhibition during this process. However, mathematical modeling and genetic analysis clearly demonstrated that Notch-mediated lateral inhibition is implemented within the proneural wave. Moreover, the combination of Notch-mediated lateral inhibition and EGF-mediated reaction diffusion enables a novel function of Notch signaling that regulates propagation of the wave of differentiation.