EGF-receptor (EGF-R) tyrosine kinase is required for the down-regulation of activated EGF-R. However, controversy exists as to whether ligand-induced activation of the EGF-R tyrosine kinase is required for internalization or for lysosomal targeting. We have addressed this issue using a cell-free assay that selectively measures the recruitment of EGF-R into coated pits. Here we show that EGF bound to wild-type receptors is efficiently sequestered in coated pits. In contrast, sequestration of kinase-deficient receptors occurs inefficiently and at the same basal rate of endocytosis of unoccupied receptors or receptors lacking any cytoplasmic domain. Sequestration of deletion mutants of the EGF-R that lack autophosphorylation sites also requires an active tyrosine kinase. This suggests that a tyrosine kinase substrate(s) other than the EGF-R itself, is required for its efficient ligand-induced recruitment into coated pits. Addition of a soluble EGF-R tyrosine kinase fully and specifically restores the recruitment of kinase-deficient EGF-R into coated pits providing a powerful functional assay for identification of these substrate(s).