The epithelium that lines the conducting airways is composed of several distinct cell types that differentiate from common progenitor cells. The signals that control fate selection and differentiation of ciliated cells, a major component of the epithelium, are not completely understood. Ciliated cell differentiation can be accomplished in vitro when primary normal human bronchial epithelial (NHBE) cells are cultured at an air-liquid interface, but is inhibited when NHBE cells are cultured under submerged conditions. The mechanism by which submersion prevents ciliogenesis is not understood, but may provide clues to in vivo regulation of ciliated cell differentiation. We hypothesized that submersion creates a hypoxic environment that prevents ciliated cell differentiation by blocking the gene expression program required for ciliogenesis. This was confirmed by showing that expression of multicilin and Forkhead box J1, key factors needed for ciliated cell differentiation, was inhibited when NHBE cells were cultured in submerged and hypoxic conditions. Multicilin and Forkhead box J1 expression and ciliated cell differentiation were restored in submerged and hypoxic cells upon treatment with the g-secretase inhibitor, N-[(3,5-difluorophenyl)acetyl]-L-alanyl-2-phenyl] glycine-1,1-dimethylethyl ester (DAPT), which suggested that Notch signaling was involved. Overexpression of Notch intracellular domain inhibited differentiation in the presence of DAPT, confirming the role of Notch signaling. These results indicate that submersion and hypoxia prevent ciliated cell differentiation by maintaining Notch signaling, which represses genes necessary for ciliogenesis. These data provide new insights into the molecular mechanisms that control human bronchial differentiation.