bHLH transcription factors function in neuronal development in organisms as diverse as worms and vertebrates. In the C. elegans male tail, a neuronal sublineage clonally gives rise to the three cell types (two neurons and a structural cell) of each sensory ray. We show here that the bHLH genes lin-32 and hlh-2 are necessary for the specification of multiple cell fates within this sublineage, and for the proper elaboration of differentiated cell characteristics. Mutations in lin-32, a member of the atonal family, can cause failures at each of these steps, resulting in the formation of rays that lack fully-differentiated neurons, neurons that lack cognate rays, and ray cells defective in the number and morphology of their processes. Mutations in hlh-2, the gene encoding the C. elegans E/daughterless ortholog, enhance the ray defects caused by lin-32 mutations. In vitro, LIN-32 can heterodimerize with HLH-2 and bind to an E-box-containing probe. Mutations in these genes interfere with this activity in a manner consistent with the degree of ray defects observed in vivo. We propose that LIN-32 and HLH-2 function as a heterodimer to activate different sets of targets, at multiple steps in the ray sublineage. During ray development, lin-32 performs roles of proneural, neuronal precursor, and differentiation genes of other systems.