In response to epidermal growth factor (EGF) stimulation, the intrinsic protein tyrosine kinase of EGF receptor is activated, leading to tyrosine phosphorylation of several cellular substrate proteins, including the EGF receptor molecule itself. To test the mechanism of EGF receptor autophosphorylation in living cells, we established transfected cell lines coexpressing a kinase-negative point mutant of EGF receptor (K721A) with an active EGF receptor mutant lacking 63 amino acids from its carboxy terminus. The addition of EGF to these cells caused tyrosine phosphorylation of the kinase-negative mutant by the active receptor molecule, demonstrating EGF receptor cross-phosphorylation in living cells. After internalization the kinase-negative mutant and CD63 have separate trafficking pathways. This limits their association and the extent of cross-phosphorylation of K721A by CD63. The coexpression of the kinase-negative mutant together with active EGF receptors in the same cells suppressed the mitogenic response toward EGF as compared with that in cells that express active receptors alone. The presence of the kinase-negative mutant functions as a negative dominant mutation suppressing the response of active EGF receptors, probably by interfering with EGF-induced signal transduction. It appears, therefore, that crucial events of signal transduction occur before K721A and active EGF receptors are separated by their different endocytic itineraries.