The intrinsic protein-tyrosine kinase activity of the epidermal growth factor (EGF) receptor is required for signal transduction. Increased protein-tyrosine kinase activity is observed following the binding of EGF to the receptor. However, signaling is rapidly desensitized during EGF treatment. We report that EGF receptors isolated from desensitized cells exhibit a lower protein-tyrosine kinase activity than EGF receptors isolated from control cells. The mechanism of desensitization of kinase activity can be accounted for, in part, by the EGF-stimulated phosphorylation of the receptor at Ser1046/7, a substrate for the multifunctional calmodulin-dependent protein kinase II in vitro. Mutation of Ser1046/7 by replacement with Ala residues blocks desensitization of the EGF receptor protein-tyrosine kinase activity. Furthermore, this mutation causes a marked inhibition of the EGF-stimulated endocytosis and down-regulation of cell surface receptors. Thus, the phosphorylation site Ser1046/7 is required for EGF receptor desensitization in EGF-treated cells. This regulatory phosphorylation site is located at the carboxyl terminus of the EGF receptor within the subdomain that binds src homology 2 regions of signaling molecules.