Ligand binding to receptors of the LIN-12/Notch family causes at least two proteolytic cleavages: one between the extracellular and transmembrane domains, and the other within the transmembrane domain. The transmembrane cleavage depends on Presenilin, a protein also required for transmembrane cleavage of β-APP. Here, we have assayed the substrate requirements for Presenilin-dependent processing of Notch and other type I transmembrane proteins in vivo. We find that the Presenilin-dependent cleavage does not depend critically on the recognition of particular sequences in these proteins but rather on the size of the extracellular domain: the smaller the size, the greater the efficiency of cleavage. Hence, Notch, β-APP, and perhaps other proteins may be targeted for Presenilin-mediated transmembrane cleavage by upstream processing events that sever the extracellular domain from the rest of the protein.