Developmental patterning involves the progressive subdivision of tissue into different cell types by invoking different genetic programs. In particular, cell-cell signaling is a universally deployed means of specifying distinct cell fates in adjacent cells. For this mechanism to be effective, it is essential that an asymmetry be established in the signaling and responding capacities of the participating cells. Here we focus on the regulatory mechanisms underlying the role of the neuralized gene and its protein product in establishing and maintaining asymmetry of signaling through the Notch pathway. The context is the classical process of "lateral inhibition" within Drosophila proneural clusters, which is responsible for distinguishing the sensory organ precursor (SOP) and non-SOP fates among adjacent cells. We find that neur is directly regulated in proneural clusters by both proneural transcriptional activators and Enhancer of split basic helix-loop-helix repressors (bHLH-Rs), via two separate cis-regulatory modules within the neur locus. We show that this bHLH-R regulation is required to prevent the early, pre-SOP expression of neur from being maintained in a subset of non-SOPs following SOP specification. Lastly, we demonstrate that Neur activity in the SOP is required to inhibit, in a cell non-autonomous manner, both neur expression and Neur function in non-SOPs, thus helping to secure the robust establishment of distinct cell identities within the developing proneural cluster.