The Notch3 N-terminal sequence is conserved across several mammalian species but diverges from the three other Notch proteins. We determined the significance of the N-terminal sequence using deletion mutants. The first 39 amino acids are required for Notch3 receptor expression, processing, and functional activity. In contrast, the first 14 amino acids do not appear to enhance function, yet are required to reduce ectopic cytoplasmic expression of Notch3. We screened binding partners for cytoplasmic expressed Notch3 using a yeast two-hybrid assay. Notch3 binds specifically to the proteasome subunit PSMA1, and increased cytoplasmic expression of Notch3 results in inhibition of proteasome activity. Our findings support a multifunctional role for the conserved N-terminal sequence of Notch3: targeting of the protein to the secretory pathway and reduction of cytoplasmic Notch3 expression which may inhibit cytoplasmic functions.