Both homo- and hetero-dimers of ErbB receptor tyrosine kinases mediate signaling by a large group of epidermal growth factor (EGF)-like ligands. However, some ligands are more potent than others, although they bind to the same direct receptor. In addition, signaling by receptor heterodimers is superior to homodimers. We addressed the mechanism underlying these two features of signal tuning by using three ligands: EGF; transforming growth factor alpha (TGFalpha); and their chimera, denoted E4T, which act on cells singly expressing ErbB-1 as a weak, a strong, and a very strong agonist, respectively. Co-expression of ErbB-2, a developmentally important co-receptor whose expression is frequently elevated in human cancers, specifically potentiated EGF signaling to the level achieved by TGFalpha, an effect that was partially mimicked by ErbB-3. Analysis of the mechanism underlying this trans-potentiation implied that EGF-driven homodimers of ErbB-1 are destined for intracellular degradation, whereas the corresponding heterodimers with ErbB-2 or with ErbB-3, dissociate in the early endosome. As a consequence, in the presence of either co-receptor, ErbB-1 is recycled to the cell surface and its signaling is enhanced. This latter route is followed by TGFalpha-driven homodimers of ErbB-1, and also by E4T-bound receptors, whose signaling is further enhanced by repeated cycles of binding and dissociation from the receptors. We conclude that alternative endocytic routes of homo- and hetero-dimeric receptor complexes may contribute to tuning and diversification of signal transduction. In addition, the ability of ErbB-2 to shunt ligand-activated receptors to recycling may explain, in part, its oncogenic potential.