Ligand-activated receptor tyrosine kinases undergo endocytosis and are transported via endosomes to lysosomes for degradation. This "receptor down-regulation" process is crucial to terminate the cell proliferation signals produced by activated receptors. During the process, ubiquitination of the receptors serves as a sorting signal for their trafficking from endosomes to lysosomes. Here, we describe the role of a deubiquitinating enzyme UBPY/USP8 in the down-regulation of epidermal growth factor (EGF) receptor (EGFR). Overexpression of UBPY reduced the ubiquitination level of EGFR and delayed its degradation in EGF-stimulated cells. Immunopurified UBPY deubiquitinated EGFR in vitro. In EGF-stimulated cells, UBPY underwent ubiquitination and bound to EGFR. Overexpression of Hrs or a dominant-negative mutant of SKD1, proteins that play roles in the endosomal sorting of ubiquitinated receptors, caused the accumulation of endogenous UBPY on exaggerated endosomes. A catalytically inactive UBPY mutant clearly localized on endosomes, where it overlapped with EGFR when cells were stimulated with EGF. Finally, depletion of endogenous UBPY by RNA interference resulted in elevated ubiquitination and accelerated degradation of EGF-activated EGFR. We conclude that UBPY negatively regulates the rate of EGFR down-regulation by deubiquitinating EGFR on endosomes.