Abstract Background The Drosophila abnormal wing discs (awd) belongs to a highly conserved family of genes implicated in metastasis suppression, metabolic homeostasis and epithelial morphogenesis. The cellular function of the mammalian members of this family, the Nm23 proteins, has not yet been clearly defined. Previous awd genetic analyses unraveled its endocytic role that is required for proper internalization of receptors controlling different signaling pathways. In this study, we analyzed the role of Awd in controlling Notch signaling during development. Results To study the awd gene function we used genetic mosaic approaches to obtain cells homozygous for a loss of function allele. In awd mutant follicle cells and wing disc cells, Notch accumulates in enlarged early endosomes, resulting in defective Notch signaling. Our results demonstrate that awd function is required before γ-secretase mediated cleavage since over-expression of the constitutively active form of the Notch receptor in awd mutant follicle cells allows rescue of the signaling. By using markers of different endosomal compartments we show that Notch receptor accumulates in early endosomes in awd mutant follicle cells. A trafficking assay in living wing discs also shows that Notch accumulates in early endosomes. Importantly, constitutively active Rab5 cannot rescue the awd phenotype, suggesting that awd is required for Rab5 function in early endosome maturation. Conclusions In this report we demonstrate that awd is essential for Notch signaling via its endocytic role. In addition, we identify the endocytic step at which Awd function is required for Notch signaling and we obtain evidence indicating that Awd is necessary for Rab5 function. These findings provide new insights into the developmental and pathophysiological function of this important gene family.