In Notch signaling, cell-bound ligands activate Notch receptors on juxtaposed cells, but the relationship between ligand endocytosis, ubiquitylation and ligand-receptor interaction remains poorly understood. To study the specific role of ligand-receptor interaction, we identified a missense mutant of the Notch ligand Jagged1 (Nodder, Ndr) that failed to interact with Notch receptors, but retained a cellular distribution that was similar to wild-type Jagged1 (Jagged1^WT) in the absence of active Notch signaling. Both Jagged1^WT and Jagged1^Ndr interacted with the E3 ubiquitin ligase Mind bomb, but only Jagged1^WT showed enhanced ubiquitylation after co-culture with cells expressing Notch receptor. Cells expressing Jagged1^WT, but not Jagged1^Ndr, trans-endocytosed the Notch extracellular domain (NECD) into the ligand-expressing cell, and NECD colocalized with Jagged1^WT in early endosomes, multivesicular bodies and lysosomes, suggesting that NECD is routed through the endocytic degradation pathway. When coexpressed in the same cell, Jagged1^Ndr did not exert a dominant-negative effect over Jagged1^WT in terms of receptor activation. Finally, in Jag1^Ndr/Ndr mice, the ligand was largely accumulated at the cell surface, indicating that engagement of the Notch receptor is important for ligand internalization in vivo. In conclusion, the interaction-dead Jagged1^Ndr ligand provides new insights into the specific role of receptor-ligand interaction in the intracellular trafficking of Notch ligands.