Evidence indicates that endosomal entry promotes signaling by the Notch receptor, but the mechanisms involved are not clear. In a search for factors that regulate Notch activation in endosomes, we isolated mutants in Drosophila genes that encode subunits of the vacuolar ATPase (V-ATPase) proton pump. Cells lacking V-ATPase function display impaired acidification of the endosomal compartment and a correlated failure to degrade endocytic cargoes. V-ATPase mutant cells internalize Notch and accumulate it in the lysosome, but surprisingly also show a substantial loss of both physiological and ectopic Notch activation in endosomes. V-ATPase activity is required in signal-receiving cells for Notch signaling downstream of ligand activation but upstream of gamma-secretase-dependent S3 cleavage. These data indicate that V-ATPase, probably via acidification of early endosomes, promotes not only the degradation of Notch in the lysosome but also the activation of Notch signaling in endosomes. The results also suggest that the ionic properties of the endosomal lumen might regulate Notch cleavage, providing a rationale for physiological as well as pathological endocytic control of Notch activity.