Cancer stem cells (CSCs) possess properties of continuous self-renewal, multi-directional differentiation and natural chemoresistance, leading to the initiation, progression and relapse of cancer. The characteristics of CSCs are strongly associated with multiple cellular pathways such as Notch1 signaling. Therefore, targeting CSCs via suppressing the Notch1 pathway might represent a promising strategy for cancer treatment. The well-known traditional Chinese medicine (TCM) formula Pien Tze Huang (PZH) has long been used as an alternative remedy for various cancers including colorectal cancer (CRC). We previously reported that PZH contains a broad range of anticancer activities including an inhibitory effect on CSCs. To further elucidate the mode of action of PZH, in this study we isolated the stem-like side population (SP) from the human CRC SW480 cell line to investigate its effect on CSCs as well as the possible molecular mechanisms. As compared with non-SP cells, the isolated SW480 SP cells displayed stronger capacities of spheroid formation in vitro and tumorigenicity in vivo, demonstrating the stem cell-like features of SP cells. However, PZH treatment significantly decreased the percentage of SP cells in a dose-dependent manner. In addition, PZH significantly and does-dependently inhibited the viability and promoted the apoptosis and differentiation of the isolated SW480 SP cells. Moreover, PZH treatment profoundly reduced the mRNA and protein expression of Notch1 and Hes1 in the SP cells. Our findings suggest that PZH negatively modulates the characteristics of CSCs through suppression of the Notch1 signaling pathway.