Both neurons and glia of the PNS are derived from the neural crest. In this study, we have examined the potential function of lunatic fringe in neural tube and trunk neural crest development by gain-of-function analysis during early stages of nervous system formation. Normally lunatic fringe is expressed in three broad bands within the neural tube, and is most prominent in the dorsal neural tube containing neural crest precursors. Using retrovirally-mediated gene transfer, we find that excess lunatic fringe in the neural tube increases the numbers of neural crest cells in the migratory stream via an apparent increase in cell proliferation. In addition, lunatic fringe augments the numbers of neurons and upregulates Delta-1 expression. The results indicate that, by modulating Notch/Delta signaling, lunatic fringe not only increases cell division of neural crest precursors, but also increases the numbers of neurons in the trunk neural crest.