Incubation of fetal rat hepatocytes (FRH) with transforming growth factor beta 1 (TGF-beta 1) resulted in growth arrest and a biphasic effect on epidermal growth factor (EGF) receptor. After 2 h of exposure, EGF receptor (EGFR) was reduced by 43%. From 6 to 24 h, TGF-beta 1 exposure resulted in progressive increase in EGFR up to 74% over control. The increased binding was due to increase in high affinity EGF binding sites. FRH grown in medium containing EGF exhibited down-regulated EGFR with loss of high affinity EGF binding sites. With TGF-beta 1 exposure, high affinity EGFR was not down-regulated by EGF. Since down-regulation of EGFR involves internalization, the kinetics of EGF receptor-mediated endocytosis were examined. In TGF-beta 1-exposed FRH, EGF endocytosis was inhibited, with a reduction in the first order rate constant for the process from 0.078 to 0.043 min-1. Despite inhibition of growth, receptor down-regulation, and EGF endocytosis after TGF-beta 1 exposure, EGF-induced receptor autophosphorylation was preserved as demonstrated by [32P]phosphate-labeling of immunoprecipitated EGFR. These observations provide direct evidence that TGF-beta 1 regulates growth of fetal cells. Further, they suggest that TGF-beta 1 regulates endocytosis of EGF and possibly of other ligands.