In the development of multicellular organisms a diversity of cell types differentiate at specific positions. Spacing patterns, in which an array of two or more cell types forms from a uniform field of cells, are a common feature of development. Identical precursor cells may adopt different fates because of competition and inhibition between them. Such a pattern in the developing Drosophila eye is the evenly spaced array of R8 cells, around which other cell types are subsequently recruited. Genetic studies suggest that the scabrous mutation disrupts a signal produced by R8 cells that inhibits other cells from also becoming R8 cells. The scabrous locus was cloned, and it appears to encode a secreted protein partly related to the beta and gamma chains of fibrinogen. It is proposed that the sca locus encodes a lateral inhibitor of R8 differentiation. The roles of the Drosophila EGF-receptor homologue (DER) and Notch genes in this process were also investigated.