Egfr ligand processing in Drosophila involves trafficking of the ligand precursor by the chaperone Star from the endoplasmic reticulum (ER) to a secretory compartment, where the precursor is cleaved by the intramembrane protease Rhomboid. Some of the Drosophila Rhomboids also reside in the ER, where they attenuate signaling by premature cleavage of Star. The genome of the flour beetle Tribolium castaneum contains a single gene for each of the ligand-processing components, providing an opportunity to assess the regulation and impact of a simplified ligand-processing cassette. We find that the central features of ligand retention, trafficking by the chaperone and cleavage by Rhomboid have been conserved. The single Rhomboid is localized to both ER and secretory compartments. However, we show that Tribolium Star is refractive to Rhomboid cleavage. Consequently, this ligand-processing system effectively mediates long-range Egfr activation in the Tribolium embryonic ventral ectoderm, despite ER localization of Rhomboid. Diversification of the Egfr signaling pathway appears to have coupled gene duplication events with modulation of the biochemical properties and subcellular localization patterns of Rhomboid proteases and their substrates.