In vitro cell-based methods for identifying compounds that inhibit Notch cleavage and methods for identifying .gamma.-secretase inhibitors that exhibit reduced induction of goblet cell metaplasia are provided. Also provided are methods of identifying compounds that inhibit cleavage of .gamma.-secretase substrates other than Notch and homogeneous compositions or cultures of Notch-expressing cells that undergo mucin-2 or mucin-5AC induction in response to a compound known to inhibit Notch cleavage and methods of their generation.