Zebrafish neurogenin1 encodes a basic helix-loop-helix protein which shares structural and functional characteristics with proneural genes of Drosophila melanogaster. neurogenin1 is expressed in the early neural plate in domains comprising more cells than the primary neurons known to develop from these regions and its expression is modulated by Delta/Notch signalling, suggesting that it is a target of lateral inhibition. Misexpression of neurogenin1 in the embryo results in development of ectopic neurons. Markers for different neuronal subtypes are not ectopically expressed in the same patterns in neurogenin1-injected embryos suggesting that the final identity of the ectopically induced neurons is modulated by local cues. Induction of ectopic motor neurons by neurogeninl requires coexpression of a dominant negative regulatory subunit of protein kinase A, an intracellular transducer of hedgehog signals. Moreover, the pattern of endogenous neurogenin1 expression in the neural plate is expanded in response to elevated levels of Hedgehog (Hh) signalling or abolished as a result of inhibition of Hh signalling. Together these data suggest that Hh signals regulate neurogenin1 expression and subsequently modulate the type of neurons produced by Neurogenin1 activity.