Lola is a transcription repressor that regulates axon guidance in the developing embryonic nervous system of Drosophila. Here, we show that Lola regulates two binary cell fate decisions guided by Notch inductive signaling in the developing eye: the R3-R4 and the R7-cone cell fate choices. Lola is required cell-autonomously in R3 for its specification, and Lola transforms R4 into R3 if overexpressed. Lola also promotes R7 fate at the expense of cone cell fate. Lola antagonizes Notch-dependent gene expression and Notch-dependent fate transformation. Expression analysis shows that Lola is constitutively present in all photoreceptors and cone cells. We propose that when a precursor cell receives a weak Notch inductive signal, it is not sufficiently strong to overcome the constitutive repression of target gene transcription by Lola. A precursor that receives a strong Notch inductive signal expresses target genes despite a constitutive repression by Lola. The predicted consequence of this mechanism is to sharpen a cell's responsiveness to Notch signaling by creating a threshold.