Notch signaling is controlled by ligand binding, which unfolds a negative control region to induce proteolytic cleavage of the receptor. First, a membrane-proximal cleavage is executed by a metalloprotease, removing the extracellular domain. This allows γ-secretase to execute a second cleavage within the Notch transmembrane domain, which releases the intracellular domain to enter the nucleus. Here we show that the ADAM10 metalloprotease Kuzbanian, but not ADAM17/tumor necrosis factor α-converting enzyme, plays an essential role in executing ligand-induced extracellular cleavage at site 2 (S2) in cells and localizes this step to the plasma membrane. Importantly, genetic or pharmacological inhibition of metalloproteases still allowed extracellular cleavage of Notch, indicating the presence of unknown proteases with the ability to cleave at S2. Gain of function mutations identified in human cancers and in model organisms that map to the negative control region alleviate the requirement for ligand binding for extracellular cleavage to occur. Because cancer-causing Notch1 mutations also depend on (rate-limiting) S2 proteolysis, the identity of these alternative proteases has important implications for understanding Notch activation in normal and cancer cells.