Notch signaling is critical to animal development, and its dysregulation leads to human maladies ranging from birth defects to cancer. Although endocytosis is currently thought to promote signal activation by delivering activated Notch to endosome-localized γ-secretase, the data are controversial and the mechanisms that control Notch endocytosis remain poorly defined. Here, we investigated the relationship between Notch internalization and signaling. siRNA-mediated depletion studies reveal that Notch endocytosis is clathrin-dependent and requires epsin1, the adaptor protein complex (AP2) and Nedd4. Moreover, we show that epsin1 interaction with Notch is ubiquitin-dependent. Contrary to the current model, we show that internalization defects lead to elevated γ-secretase-mediated Notch processing and downstream signaling. These results indicate that signal activation occurs independently of Notch endocytosis and that γ-secretase cleaves Notch at the plasma membrane. These observations support a model where endocytosis serves to downregulate Notch in signal-receiving cells.