Activation of mammalian Notch receptor by its ligands induces TNFalpha-converting enzyme-dependent ectodomain shedding, followed by intramembrane proteolysis due to presenilin (PS)-dependent gamma-secretase activity. Here, we demonstrate that a new modification, a monoubiquitination, as well as clathrin-dependent endocytosis, is required for gamma-secretase processing of a constitutively active Notch derivative, DeltaE, which mimics the TNFalpha-converting enzyme-processing product. PS interacts with this modified form of DeltaE, DeltaEu. We identified the lysine residue targeted by the monoubiquitination event and confirmed its importance for activation of Notch receptor by its ligand, Delta-like 1. We propose a new model where monoubiquitination and endocytosis of Notch are a prerequisite for its PS-dependent cleavage, and discuss its relevance for other gamma-secretase substrates.