Ligand-induced down-regulation of two growth factor receptors, EGF receptor (ErbB-1) and ErbB-3, correlates with differential ability to recruit c-Cbl, whose invertebrate orthologs are negative regulators of ErbB. We report that ligand-induced degradation of internalized ErbB-1, but not ErbB-3, is mediated by transient mobilization of a minor fraction of c-Cbl into ErbB-1-containing endosomes. This recruitment depends on the receptor’s tyrosine kinase activity and an intact carboxy-terminal region. The alternative fate is recycling of internalized ErbBs to the cell surface. Cbl-mediated receptor sorting involves covalent attachment of ubiquitin molecules, and subsequent lysosomal and proteasomal degradation. The oncogenic viral form of Cbl inhibits down-regulation by shunting endocytosed receptors to the recycling pathway. These results reveal an endosomal sorting machinery capable of controlling the fate, and, hence, signaling potency, of growth factor receptors.