The vulval precursor cells (VPCs) of Caenorhabditis elegans are polarized epithelial cells that adopt a precise pattern of fates through regulated activity of basolateral LET-23/EGF receptor and apical LIN-12/Notch. During VPC patterning, there is reciprocal modulation of endocytosis and trafficking of both LET-23 and LIN-12. We identified sel-2 as a negative regulator of lin-12/Notch activity in the VPCs, and found that SEL-2 is the homolog of two closely related human proteins, neurobeachin (also known as BCL8B) and LPS-responsive, beige-like anchor protein (LRBA). SEL-2, neurobeachin and LRBA belong to a distinct subfamily of BEACH-WD40 domain-containing proteins. Loss of sel-2 activity leads to basolateral mislocalization and increased accumulation of LIN-12 in VPCs in which LET-23 is not active, and to impaired downregulation of basolateral LET-23 in VPCs in which LIN-12 is active. Downregulation of apical LIN-12 in the VPC in which LET-23 is active is not affected. In addition, in sel-2 mutants, the polarized cells of the intestinal epithelium display an aberrant accumulation of the lipophilic dye FM4-64 when the dye is presented to the basolateral surface. Our observations indicate that SEL-2/neurobeachin/LRBA is involved in endosomal traffic and may be involved in efficient delivery of cell surface proteins to the lysosome. Our results also suggest that sel-2 activity may contribute to the appropriate steady-state level of LIN-12 or to trafficking events that affect receptor activation.