A cellular automaton (CA) is constructed for the formation of the central nervous system of the Drosophila embryo. This is an experimentally well-studied system in which complex interactions between neighbouring cells appear to drive their differentiation into different types. It appears that all the cells initially have the potential to become neuroblasts, and all strive to this end, but those which differentiate first block their as yet undifferentiated neighbours from doing so. The CA makes use of observational evidence for a lateral inhibition mechanism involving signalling products of the ‘proneural' or neuralizing genes. The key concept of the model is that cells are continuously producing , but the production rate is lowered by inhibitory signals received from neighbouring cells which have advanced further along the developmental pathway. Comparison with experimental data shows that it well accounts for the observed proportion of neuroectodermal cells delaminating as neuroblasts.