The Notch signaling pathway, which plays a critical role in cell-fate decisions throughout development, is regulated by endocytosis of both the ligand and receptor. Endocytosis of the Drosophila ligands, Delta and Serrate, is required in the signaling cell for signal initiation and requires one of two ubiquitin ligases, Neuralized or Mind bomb. Through in vitro binding assays we have identified an interaction between Neuralized and phosphoinositides, modified membrane lipids that mediate membrane trafficking and signaling. We show that interactions between phosphoinositides and Neuralized contribute to the membrane localization of Neuralized in the absence of Delta, and that the phosphoinositide-binding motif is required for Neuralized to endocytose Delta downstream of Delta ubiquitination. Lastly, we provide evidence that this interaction may also be important for vertebrate Neuralized function. These results demonstrate that, through interactions with Neuralized, phosphoinositides may regulate Delta endocytosis and, by extension, Notch signal transduction.