Pudgy (pu) homozygous mice exhibit clear patterning defects at the earliest stages of somitogenesis, resulting in adult mice with severe vertebral and rib deformities. By positional cloning and complementation, we have determined that the pu phenotype is caused by a mutation in the delta-like 3 gene (Dll3), which is homologous to the Notch-ligand Delta in Drosophila. Histological and molecular marker analyses show that the pu mutation disrupts the proper formation of morphological borders in early somite formation and of rostral-caudal compartment boundaries within somites. Viability analysis also indicates an important role in early development. The results point to a key role for a Notch-signalling pathway in the initiation of patterning of vertebrate paraxial mesoderm.