Mutations in ELA2, encoding the human serine protease neutrophil elastase, cause cyclic and severe congenital neutropenia, and recent evidence indicates that the mutations alter the membrane trafficking of neutrophil elastase. These disorders feature impaired bone marrow production of neutrophils along with excess monocytes-terminally differentiated lineages corresponding to the two alternative fates of myeloid progenitor cells. We utilized a modified yeast two-hybrid system and identified a new, widely expressed gene, N2N, whose product is homologous to Notch2, that interacts with neutrophil elastase. N2N is a 36-kDa protein distributed throughout the cell and secreted. Its amino-terminal sequence consists of several EGF repeats identical to those of the extracellular region of Notch2, and its carboxyl terminus contains a unique 24-residue domain required for interaction with neutrophil elastase. Neutrophil elastase cleaves N2N within EGF repeats in vitro and in living cells, but the C-terminal domain retards proteolysis. In vitro, N2N represses transcriptional activities of Notch proteins. Disease-causing mutations of neutrophil elastase disrupt the interaction with N2N, impair proteolysis of N2N and Notch2, and interfere with Notch2 signaling, suggesting defective proteolysis of an inhibitory form of Notch as an explanation for the alternate switching of cell fates characteristic of hereditary neutropenia.Neutrophils are phagocytic white blood cells that serve as a first line of defense against bacterial and fungal infection and coordinate inflammatory responses. The surprising finding that mutation of the gene ELA2, encoding neutrophil elastase (NE), is responsible for inherited forms of human neutropenia indicates that this serine protease, primarily found in granules of neutrophils and monocytes, plays an unexpected role in the regulation of hematopoietic stem cell differentiation. The two major forms of human hereditary neutropenia are cyclic neutropenia (CN), characterized by 21-day sinusoidal oscillations in neutrophil production, and severe congenital neutropenia (SCN), comprised of arrested promyelocytic differentiation frequently progressing to myelodysplasia and acute myelogenous leukemia. CN is always (22), and SCN usually (2, 12), the result of autosomal dominant, heterozygous ELA2 mutations.To date, a total of more than two dozen mutant NE proteins have been reported (21). However, the role of the mutations in the pathophysiology of these disorders and NE's normal function in myeloid differentiation remain unclear. The mutations have variable effects on overall catalytic activity and are not cytotoxic (28). The recent finding that the mutations do affect the subcellular localization of NE (6), and, in particular, their membrane trafficking, suggests the possibility of defective interactions between mutant NE and membrane proteins.Additionally, two clinical clues suggest how NE might contribute to myelopoiesis. First, it appears that neutropenia results from an aberrant switch in cell fate. A stri...