In Drosophila, Notch signaling regulates binary fate decisions at each asymmetric division in sensory organ lineages. Following division of the sensory organ precursor cell (pI), Notch is activated in one daughter cell (pIIa) and inhibited in the other (pIIb). We report that the E3 ubiquitin ligase Neuralized localizes asymmetrically in the dividing pI cell and unequally segregates into the pIIb cell, like the Notch inhibitor Numb. Furthermore, Neuralized upregulates endocytosis of the Notch ligand Delta in the pIIb cell and acts in the pIIb cell to promote activation of Notch in the pIIa cell. Thus, Neuralized is a conserved regulator of Notch signaling that acts as a cell fate determinant. Polarization of the pI cell directs the unequal segregation of both Neuralized and Numb. We propose that coordinated upregulation of ligand activity by Neuralized and inhibition of receptor activity by Numb results in a robust bias in Notch signaling.