Notch signaling regulates cell fate decisions in a wide variety of adult and embryonic tissues. Here we show that Notch pathway components and Notch target genes are upregulated in invasive pancreatic cancer, as well as in pancreatic cancer precursors from both mouse and human. In mouse pancreas, ectopic Notch activation results in accumulation of nestin-positive precursor cells and expansion of metaplastic ductal epithelium, previously identified as a precursor lesion for pancreatic cancer. Notch is also activated as a direct consequence of EGF receptor activation in exocrine pancreas and is required for TGF alpha-induced changes in epithelial differentiation. These findings suggest that Notch mediates the tumor-initiating effects of TG alpha by expanding a population of undifferentiated precursor cells.