The Notch signaling pathway regulates gene expression programs to influence the specification of cell fate in diverse tissues. In response to ligand binding, the intracellular domain of the Notch receptor is cleaved by the gamma-secretase complex and then translocates to the nucleus. There, it binds the transcriptional repressor CSL, triggering its conversion to an activator of Notch target gene expression. The events that control this conversion are poorly understood. We show that the transcriptional corepressor, MTG16, interacts with both CSL and the intracellular domains of Notch receptors, suggesting a pivotal role in regulation of the Notch transcription complex. The Notch1 intracellular domain disrupts the MTG16-CSL interaction. Ex vivo fate specification in response to Notch signal activation is impaired in Mtg16-/- hematopoietic progenitors, and restored by MTG16 expression. An MTG16 derivative lacking the binding site for the intracellular domain of Notch1 fails to restore Notch-dependent cell fate. These data suggest that MTG16 interfaces with critical components of the Notch transcription complex to affect Notch-dependent lineage allocation in hematopoiesis.