How cells in developing organisms interpret the quantitative information contained in morphogen gradients is an open question. Here we address this question using a novel integrative approach that combines quantitative measurements of morphogen-induced gene expression at single-mRNA resolution with mathematical modelling of the induction process. We focus on the induction of Notch ligands by the LIN-3/EGF morphogen gradient during vulva induction in Caenorhabditis elegans. We show that LIN-3/EGF-induced Notch ligand expression is highly dynamic, exhibiting an abrupt transition from low to high expression. Similar transitions in Notch ligand expression are observed in two highly divergent wild C. elegans isolates. Mathematical modelling and experiments show that this transition is driven by a dynamic increase in the sensitivity of the induced cells to external LIN-3/EGF. Furthermore, this increase in sensitivity is independent of the presence of LIN-3/EGF. Our integrative approach might be useful to study induction by morphogen gradients in other systems.