We compared the internalization and intracellular sorting of epidermal growth factor receptor (EGF-R) and point mutant kinase-negative EGF-R separately expressed in NIH 3T3 cells lacking endogenous receptor. Both EGF-Rs internalized rapidly, but kinase-negative receptor was surface down-regulated only with monensin or at 20 degrees C. Furthermore, EGF internalized by mutant receptor alone was, in significant proportion, returned to the cell surface undegraded. Hence unlike wild-type receptor, kinase-negative EGF-R recycles. By electron microscopy the early pathways of endocytosis for the two receptors were identical; however, after 10-20 min the pathways diverged at the multivesicular body (MVB). Wild-type EGF-R, destined for degradation, localized to internal vesicles, while kinase-negative EGF-R, destined for recycling, localized to surface membranes of the MVBs and moved to small tubulovesicles. We conclude that sorting of internalized receptor for degradation or recycling can occur through spatial segregation within the MVB, and sorting of EGF-R is controlled by tyrosine kinase activity.