Abstract: Drosophila has a simple hematopoietic system with three distinct blood cell/hemocyte types that are derived from common progenitor cells: plasmatocytes, crystal cells, and lamellocytes. The specification of their lineages is regulated by use of multiple transcription factors and signaling pathways, which play important roles in mammalian hematopoiesis as well. In this study, we investigated the role of Notch signaling in Drosophila hematopoiesis and found that Notch signaling is essential for the regulation of the Lozenge (Lz) expression and the specification of crystal cells. Notch signaling is regulated by the ligand Serrate which is expressed in cells adjacent to the Lz expressing cells within the lymph gland. Serrate is also found in a subset of cells in the lymph gland, which we termed a Posterior signaling center (PSC). The PSC marks the first subcompartment within the larval lymph gland. We have also found that unlike crystal cells, the maturation of plasmatocytes is independent of Notch signaling but is regulated by another signaling receptor molecule, Platelet-derived growth factor/vascular endothelial growth factor receptor (Pvr) in the larval lymph gland. This provides evidence that the lineage specification of two major hemocytes is regulated by two signaling pathways: Pvr signaling for plasmatocytes and Notch signaling for crystal cells. The larval lymph gland has proved to be a useful model system to study hematopoiesis however, molecular markers and the structural features were not studied in detail. Here we show that the late third instar lymph gland contains distinct zones of hemocyte maturation, signaling and proliferation through analysis of structure and gene expression. Actively cycling mature hemocytes are found in the cortical zone (CZ) while slowly cycling immature hemocytes are found in the medullary zone (MZ). The PSC shows characteristic expression profiles of novel markers. This study establishes a framework for the identification of Drosophila blood cells, at various stages of maturation, and provides a genetic basis for spatial and temporal events governing hemocyte development. The cellular events identified in this analysis further establish Drosophila as a model system for hematopoiesis.