The Notch signaling pathway defines a conserved mechanism that regulates cell fate decisions in metazoans. Signaling is modulated by a broad and multifaceted genetic circuitry, including members of the endocytic machinery. Several individual steps in the endocytic pathway have been linked to the positive or negative regulation of the Notch receptor. In seeking genetic elements involved in regulating the endosomal/lysosomal degradation of Notch, mediated by the molecular synergy between the ubiquitin ligase Deltex and Kurtz, the nonvisual β-arrestin in Drosophila, we identified Shrub, a core component of the ESCRT-III complex as a key modulator of this synergy. Shrub promotes the lysosomal degradation of the receptor by mediating its delivery into multivesicular bodies (MVBs). However, the interplay between Deltex, Kurtz, and Shrub can bypass this path, leading to the activation of the receptor. Our analysis shows that Shrub plays a pivotal rate-limiting step in late endosomal ligand-independent Notch activation, depending on the Deltex-dependent ubiquitinylation state of the receptor. This activation mode of the receptor emphasizes the complexity of Notch signal modulation in a cell and has significant implications for both development and disease.