The lin-12 and glp-1 genes of Caenorhabditis elegans encode members of the Notch family of transmembrane proteins. Genetic studies indicate that the lin-12 and glp-1 proteins act as receptors in specific developmental cell interactions and that their functions are partially redundant. lin-12 glp-1 double mutants display certain embryonic defects not found in either single mutant. The phenotype of this double mutant is called Lag, and recessive mutations in either of the genes lag-1 or lag-2 can also result in the Lag phenotype, indicating that these two genes may participate in the same cell interactions that require lin-12 or glp-1. We report here that lag-2 encodes a predicted transmembrane protein of 402 amino acids. The predicted extracellular region of lag-2 is similar to amino-terminal regions of Delta and Serrate, two Drosophila proteins that are thought to function as ligands for Notch. The region of similarity includes sequences related to epidermal growth factor (EGF) repeats. We have isolated lag2(sa37), a dominant allele that shows specific genetic interactions with lin-12. The sa37 mutation causes a Gly-->Asp change in a conserved residue of an EGF motif. Because of its overall structure, its sequence similarity to Delta and Serrate, and its genetic interactions, we suggest that lag-2 encodes an intercellular signal for the lin-12 and glp-1 receptors.