To further analyse requirements for Notch signalling in patterning the paraxial mesoderm, we generated transgenic mice that express in the paraxial mesoderm a dominant-negative version of Delta1. Transgenic mice with reduced Notch activity in the presomitic mesoderm as indicated by loss of Hes5 expression were viable and displayed defects in somites and vertebrae consistent with known roles of Notch signalling in somite compartmentalisation. In addition, these mice showed with variable expressivity and penetrance alterations of vertebral identities resembling homeotic transformations, and subtle changes of Hox gene expression in day 12.5 embryos. Mice that carried only one functional copy of the endogenous Delta1 gene also showed changes of vertebral identities in the lower cervical region, suggesting a previously unnoticed haploinsufficiency for Delta1. Likewise, in mice carrying a null allele of the oscillating Lfng gene, or in transgenic mice expressing Lfng constitutively in the presomitic mesoderm, vertebral identities were changed and numbers of segments in the cervical and thoracic regions were reduced, suggesting anterior shifts of axial identity. Together, these results provide genetic evidence that precisely regulated levels of Notch activity as well as cyclic Lfng activity are critical for positional specification of the anteroposterior body axis in the paraxial mesoderm.