Notch controls pancreatic differentiation during development and is reactivated in pancreatic cancer. In recent years, the importance of Notch signaling in pancreatic tumorigenesis has become increasingly evident; however, it remains unclear how Notch activities are regulated in this context. Here we report differential regulation of Notch receptors by Lunatic Fringe (Lfng), which encodes an O-fucosylpeptide 3-β-N-acetylglucosaminyltransferase known to modify epidermal growth factor repeats in the Notch extracellular domain, during pathogenesis of Kras-induced pancreatic ductal adenocarcinoma (PDAC). We show that Lfng is uniquely expressed in a subset of acinar cells in the adult pancreas. Deletion of Lfng in the Kras(LSL-G12D/+);Pdx1-Cre mouse model caused increased activation of Notch3 throughout PDAC initiation and progression, and Notch1 after the onset of disease, associated with marked upregulation of Notch target gene Hes1. Deletion of Lfng also resulted in accumulation of Aldh1-positive cell population. We found that loss of Lfng significantly accelerated Kras-initiated PDAC development and shortened survival of the PDAC mice. Interestingly, Lfng-deficient tumors showed a propensity for a poorly differentiated state with features of epithelial-to-mesenchymal transition. Likewise, knockdown of LFNG in human PDAC cell lines caused elevated Notch activation, associated with either accelerated cell proliferation or expanded Aldh1-positive cell population. Deletion of Lfng resulted in downregulation of Tgfb1, Tgfb2 and Tgfbr2 expression in the wild-type pancreas at all ages examined, and in the Kras(LSL-G12D/+);Pdx1-Cre pancreas after PDAC onset, as well as reduced phospho-Smad2 levels in pancreatic tumors. We provide evidence that Lfng regulates transforming growth factor (TGF)-β signaling through Notch-mediated transcriptional repression of TGF-β pathway genes. Taken together, our results reveal a potent tumor-suppressive function for Lfng and crosstalk between Notch and TGF-β pathways in the pancreas, which provides new insight into initiation of PDAC and signals involved in disease progression.