The histone chaperone CAF-1 is known for its role in DNA replication-coupled histone deposition. However, loss of function causes lethality only in higher multicellular organisms such as mice and flies, but not in unicellular organisms such as yeasts, suggesting that CAF-1 has other important functions than histone deposition during animal development. Emerging evidence indicates that CAF-1 also has a role in higher order chromatin organization and heterochromatin-mediated gene expression; it remains unclear whether CAF-1 has a role in specific signaling cascades to promote gene expression during development. Here, we report that knockdown of one of the subunits of Drosophila CAF-1, dCAF-1-p105 (Caf1-105), results in phenotypes that resemble those of, and are augmented synergistically by, mutations of Notch positive regulatory pathway components. Depletion of dCAF-1-p105 leads to abrogation of cut expression and to downregulation of other Notch target genes in wing imaginal discs. dCAF-1-p105 is associated with Suppressor of Hairless [Su(H)] and regulates its binding to the enhancer region of E(spl)mβ. The association of dCAF-1-p105 with Su(H) on chromatin establishes an active local chromatin status for transcription by maintaining a high level of histone H4 acetylation. In response to induced Notch activation, dCAF-1 associates with the Notch intracellular domain to activate the expression of Notch target genes in cultured S2 cells, manifesting the role of dCAF-1 in Notch signaling. Together, our results reveal a novel epigenetic function of dCAF-1 in promoting Notch pathway activity that regulates normal Drosophila development.