Mutations in the epidermal growth factor receptor (EGFR) are the most common actionable genetic abnormalities yet discovered in lung cancer. However, targeting these mutations with kinase inhibitors is not curative in advanced disease and has yet to demonstrate an impact on potentially curable, early-stage disease, with some data suggesting adverse outcomes. Here, we report that treatment of EGFR-mutated lung cancer cell lines with erlotinib, while showing robust cell death, enriches the ALDH⁺ stem-like cells through EGFR-dependent activation of Notch3. In addition, we demonstrate that erlotinib treatment increases the clonogenicity of lung cancer cells in a sphere-forming assay, suggesting increased stem-like cell potential. We demonstrate that inhibition of EGFR kinase activity leads to activation of Notch transcriptional targets in a γ secretase inhibitor-sensitive manner and causes Notch activation, leading to an increase in ALDH high⁺ cells. We also find a kinase-dependent physical association between the Notch3 and EGFR receptors and tyrosine phosphorylation of Notch3. This could explain the worsened survival observed in some studies of erlotinib treatment at early-stage disease, and suggests that specific dual targeting might overcome this adverse effect. Cancer Res; 74(19); 5572–84. ©2014 AACR.