Hepatocyte growth factor-regulated tyrosine kinase substrate (Hrs) is a prominent substrate for activated tyrosine kinase receptors that has been proposed to play a role in endosomal membrane trafficking. The protein contains a FYVE domain, which specifically binds to the lipid phosphatidylinositol (PI) 3-phosphate (PI 3-P). We show that this interaction is required both for correct localization of the protein to endosomes that only partially coincides with early endosomal autoantigen 1 and for efficient tyrosine phosphorylation of the protein in response to epidermal growth factor stimulation. Treatment with wortmannin reveals that Hrs phosphorylation also requires PI 3-kinase activity, which is necessary to generate the PI 3-P required for localization. We have used both hypertonic media and expression of a dominant-negative form of dynamin (K44A) to inhibit endocytosis; under which conditions, receptor stimulation fails to elicit phosphorylation of Hrs. Our results provide a clear example of the coupling of a signal transduction pathway to endocytosis, from which we propose that activated receptor (or associated factor) must be delivered to the appropriate endocytic compartment in order for Hrs phosphorylation to occur.