Notch signal transduction is mediated by proteolysis of the receptor and translocation of the intracellular domain (IC) into the nucleus, where it functions as a regulator of HES gene expression after binding to the DNA-binding protein RBP-J kappa. The mammalian Notch receptors are structurally very similar, but have distinct functions. Most notably, Notch 1 IC is a potent activator of the HES promoter, while Notch 3 IC is a much weaker activator and can repress Notch 1 IC-mediated HES activation in certain contexts. In this report we explore the molecular basis for this functional difference between Notch 1 and Notch 3 IC. We find that Notch 3 IC, like Notch 1 IC, can bind the SKIP and PCAF proteins. Furthermore, both Notch 1 and Notch 3 ICs displace the co-repressor SMRT from the DNA-binding protein RBP-J kappa on the HES promoter. The latter observation suggests that both Notch 3 IC and Notch 1 IC can access RBP-J kappa in vivo, and that the difference in activation capacity instead stems from structural differences in the two ICs when positioned on RBP-J kappa. We show that two distinct regions in the Notch IC are critical for the difference between the Notch 1 and Notch 3 IC. First, the origin of the ankyrin repeat region is important, i.e. only chimeric ICs containing a Notch 1-derived ankyrin repeat region are potent activators. Second, we identify a novel important region in the Notch IC. This region, named the RE/AC region (for repression/activation), is located immediately C-terminal to the ankyrin repeat region, and is required for Notch 1 IC's ability to activate and for Notch 3 IC's ability to repress a HES promoter. The interplay between the RE/AC region and the ankyrin repeat region provides a basis to understand the difference in HES activation between structurally similar Notch receptors.