Imaginal rings are larval tissues composed of precursor cells that are essential for the formation of adult foreguts, hindguts and salivary glands. Imaginal ring cells are specified from subsets of the ectoderm at embryonic stage. These cells kept quiescent until late second instar and then undergo rapid cell proliferation during the third instar to attain adequate number of cells that will replace apoptotic larval tissues for adult organ formation. Therefore, cell specification, cell identity maintenance and cell proliferation are tightly associated with the development of imaginal rings, but the regulatory mechanisms are poorly understood. Here, we show that Notch signaling is activated in all three imaginal rings from middle embryonic stage to early pupal stage. Our mutant clonal analysis, knockdown and gain-of-function studies indicate that canonical Notch signaling positively is required and sufficient for cell proliferation in all three imaginal rings during the third instar. We also found that Serrate (Ser) but not Delta (Dl) from neighboring cells is the ligand for Notch activation. Ser predominantly trans-activates Notch signaling, but also plays a role in cis-inhibition to modulate the level of Notch activity. In addition, we demonstrate that Notch signaling is required for cell specification of all imaginal ring cells from primordium at middle embryonic stage and maintains imaginal ring cell identity during first and second instars. Taken together, our studies indicate that Notch acts as a growth-promoting and development-regulating signal in Drosophila larval precursor cells, and that imaginal rings are excellent in vivo models to decipher how Notch regulates cell proliferation and organogenesis.