Sensory systems are specialized to recognize environmental changes. Sensory organs are complex structures composed of different cell types, including neurons and sensory receptor cells, and how these organs are generated is an important question in developmental neurobiology.The posterior lateral line (pLL) is a simple sensory system in fish and amphibians that detects changes in water motion. It consists of neurons and sensory receptor hair cells, both of which are derived from the cranial ectoderm preplacodal region. However, it is not clearly understood how neurons and the sensory epithelium develop separately from the same preplacodal progenitors.We found that the numbers of posterior lateral line ganglion (pLLG) neurons, which are marked by neurod expression, increased in embryos with reduced Notch activity, but the forced activation of Notch reduced their number, suggesting that Notch-mediated lateral inhibition regulates the pLLG cell fate in zebrafish. By fate-mapping analysis, we found that cells adjacent to the pLLG neurons in the pre-pLL placodal region gave rise to the anterior part of the pLL primordium (i.e., sensory epithelial progenitor cells), and that the choice of cell fate between pLLG neuron or pLL primordium was regulated by Notch signaling. Since Notch signaling also affects hair cell fate determination at a later stage, our study suggests that Notch signaling has dual, time-dependent roles in specifying multiple cell types during pLL development.