Notch signaling is reliant on γ-secretase-mediated processing, although the subcellular location where γ-secretase cleaves Notch to initiate signaling remains unresolved. Accumulating evidence demonstrates that Notch signaling is modulated by endocytosis and endosomal transport. In this study, we investigated the relationship between Notch transport itinerary and signaling capacity. In doing so, we discovered a highly conserved dileucine sorting signal encoded within the cytoplasmic tail that directs Notch to the limiting membrane of the lysosome for signaling. Mutating the dileucine motif led to receptor accumulation in cation-dependent mannose-phosphate receptor-positive tubular early endosomes and a reduction in Notch signaling capacity. Moreover, truncated receptor forms that mimic activated Notch were readily cleaved by γ-secretase within the endosome; however, the cleavage product was proteasome-sensitive and failed to contribute to robust signaling. Collectively these results indicate that Notch signaling from the lysosome limiting membrane is conserved and that receptor targeting to this compartment is an active process. Moreover, the data support a model in which Notch signaling in mammalian systems is initiated from either the plasma membrane or lysosome, but not the early endosome.