Xath3 encodes a Xenopus neuronal-specific basic helix-loop-helix transcription factor related to the Drosophila proneural factor atonal. We show here that Xath3 acts downstream of X-ngnr-1 during neuronal differentiation in the neural plate and retina and that its expression and activity are modulated by Notch signaling. X-ngnr-1 activates Xath3 and NeuroD by different mechanisms, and the latter two genes crossactivate each other. In the ectoderm, X-ngnr-1 and Xath3 have similar activities, inducing ectopic sensory neurons. Among the sensory-specific markers tested, only those that label cranial neurons were found to be ectopically activated. By contrast, in the retina, X-ngnr-1 and Xath3 overexpression promote the development of overlapping but distinct subtypes of retinal neurons. Together, these data suggest that X-ngnr-1 and Xath3 regulate successive stages of early neuronal differentiation and that, in addition to their general proneural properties, they may contribute, in a context-dependent manner, to some aspect of neuronal identity.