DSL (Delta, Serrate, Lag-2) ligands activate Notch signaling and thereby regulate the differentiation of many different cell types during development. We have isolated a novel Serrate-like gene, Jagged2, whose amino acid sequence and expression pattern during rat embryogenesis suggest that it functions as a ligand for Notch. In contrast to previously described DSL ligands for Notch, Jagged2 is not widely expressed in the developing central nervous system. However, Jagged2 and Notch1 are coexpressed in the apical ectodermal ridge (AER), suggesting a role for this ligand-receptor pair in limb development. Furthermore, unlike Jagged1, Jagged2 is coexpressed with Notch in the developing thymus, where it may induce Notch signaling to direct T-cell fate. Our data are consistent with the idea that the diversity of cell types regulated by Notch signaling is a consequence of activation of unique Notch isoforms by different DSL ligands.