The Notch signaling pathway plays important roles in a variety of cellular processes. Aberrant transduction of Notch signaling contributes to many diseases and cancers in humans. The Notch receptor intracellular domain, the activated form of Notch receptor, is extremely difficult to detect in normal cells. However, it can activate signaling at very low protein concentration to elicit its biological effects. In the present study, a cell based luciferase reporter gene assay was established in K562 cells to screen drugs which could modulate the endogenous CBF1-dependent Notch signal pathway. Using this system, we found that the luciferase activity of CBF1-dependent reporter gene was activated by baicalin and baicalein but suppressed by niclosamide in both dose- and time-dependent manners. Treatment with these drugs modulated endogenous Notch signaling and affected mRNA expression levels of Notch1 receptor and Notch target genes in K562 cells. Additionally, erythroid differentiation of K562 cells was suppressed by baicalin and baicalein yet was promoted by niclosamide. Colony-forming ability in soft agar was decreased after treatment with baicalin and baicalein, but was not affected in the presence of niclosamide. Thus, modulation of Notch signaling after treatment with any of these three drugs may affect tumorigenesis of K562 cells suggesting that these drugs may have therapeutic potential for those tumors associated with Notch signaling. Taken together, this system could be beneficial for screening of drugs with potential to treat Notch signal pathway-associated diseases.