In Drosophila peripheral neurogenesis, Notch controls cell fates in sensory organ precursor (SOP) cells. SOPs undergo asymmetric cell division by segregating Numb, which inhibits Notch signaling, into the pIIb daughter cell after cytokinesis. In contrast, in the pIIa daughter cell, Notch is activated and requires Sanpodo, but its mechanism of action has not been elucidated. As Sanpodo is present in both pIIa and pIIb cells, a second role for Sanpodo in regulating Notch signaling in the low-Notch pIIb cell has been proposed. Here we demonstrate that Sanpodo regulates Notch signaling levels in both pIIa and pIIb cells via distinct mechanisms. The interaction of Sanpodo with Presenilin, a component of the γ-secretase complex, was required for Notch activation and pIIa cell fate. In contrast, Sanpodo suppresses Notch signaling in the pIIb cell by driving Notch receptor internalization. Together, these results demonstrate that a single protein can regulate Notch signaling through distinct mechanisms to either promote or suppress signaling depending on the local cellular context.