Incubation of fetal rat hepatocytes (FRH) with transforming growth factor β1 (TGF‐β1) resulted in growth arrest and a biphasic effect on epidermal growth factor (EGF) receptor. After 2 h of exposure, EGF receptor (EGFR) was reduced by 43%. From 6 to 24 h, TGF‐β1 exposure resulted in progressive increase in EGFR up to 74% over control. The increased binding was due to increase in high affinity EGF binding sites. FRH grown in medium containing EGF exhibited down‐regulated EGFR with loss of high affinity EGF binding sites. With TGF‐β1 exposure, high affinity EGFR was not down‐regulated by EGF. Since downregulation of EGFR involves internalization, the kinetics of EGF receptor‐mediated endocytosis were examined. In TGF‐β1 exposed FRH, EGF endocytosis was inhibited, with a reduction in the first order rate constant for the process from 0.078 to 0.043 min−1. Despite inhibition of growth, receptor downregulation, and EGF endocytosis after TGF‐β1 exposure, EGF‐induced receptor autophosphorylation was preserved as demonstrated by [32P]phosphatelabeling of immunoprecipitated EGFR. These observations provide direct evidence that TGF‐β1 regulates growth of fetal cells. Further, they suggest that TGF‐β1 regulates endocytosis of EGF and possibly of other ligands. Copyright © 1992 American Association for the Study of Liver Diseases