MicroRNAs (miRNAs) are genomically encoded small RNAs that hybridize with messenger RNAs, resulting in degradation or translational inhibition of targeted transcripts. The potential for miRNAs to regulate cell-lineage determination or differentiation from pluripotent progenitor or stem cells is unknown. Here, we show that microRNA1 (miR-1) is an ancient muscle-specific gene conserved in sequence and expression in Drosophila. Drosophila miR-1 (dmiR-1) is regulated through a serum response factor-like binding site in cardiac progenitor cells. Loss- and gain-of-function studies demonstrated a role for dmiR-1 in modulating cardiogenesis and in maintenance of muscle-gene expression. We provide in vivo evidence that dmiR-1 targets transcripts encoding the Notch ligand Delta, providing a potential mechanism for the expansion of cardiac and muscle progenitor cells and failure of progenitor cell differentiation in some dmiR-1 mutants. These findings demonstrate that dmiR-1 may “fine-tune” critical steps involved in differentiation of cardiac and somatic muscle progenitors and targets a pathway required for progenitor cell specification and asymmetric cell division.