The generation of functional structures during development requires tight spatial regulation of signaling pathways. Thus, in Drosophila legs, in which Notch pathway activity is required to specify joints, only cells distal to ligand-producing cells are capable of responding. Here, we show that the asymmetric distribution of planar cell polarity (PCP) proteins correlates with this spatial restriction of Notch activation. Frizzled and Dishevelled are enriched at distal sides of each cell and hence localize at the interface with ligand-expressing cells in the non-responding cells. Elimination of PCP gene function in cells proximal to ligand-expressing cells is sufficient to alleviate the repression, resulting in ectopic Notch activity and ectopic joint formation. Mutations that compromise a direct interaction between Dishevelled and Notch reduce the efficacy of repression. Likewise, increased Rab5 levels or dominant-negative Deltex can suppress the ectopic joints. Together, these results suggest that PCP coordinates the spatial activity of the Notch pathway by regulating endocytic trafficking of the receptor.