The autophosphorylation, from [gamma-32P]ATP, of insulin and epidermal growth factor receptors in rat liver endosomes peaked at 2-5 min and declined thereafter. When autophosphorylation from either [gamma-32P]ATP or unlabeled ATP was stopped after 5 min by adding excess EDTA +/- ATP, the phosphotyrosine (PY) content of each receptor decreased at 37 degrees C with a t 1/2 of 1.6 min. This was equally so whether the PY content of 32P-labeled receptors was analyzed by autoradiography of KOH-treated gels or by Western blotting with PY antibodies of immunoprecipitated receptors. The dephosphorylation reaction was strictly dependent on the presence of sulfhydryl, was unaffected by the addition of rat liver cytosol, and was temperature-dependent. The phosphotyrosine phosphatase(s) (PTPase(s)) appeared to be tightly anchored to the endosomal membrane, since the dephosphorylation reaction was unaffected by sodium carbonate and 0.6 M KCl treatments. However, treatment with Triton X-100 abolished dephosphorylation, implying an intimate association between the PTPase(s) and its substrate in an intact membrane environment. The powerful insulinomimetic agent pervanadate was the most potent inhibitor (50% inhibition at 1 microM). Increasing the dose of injected ligand augmented the rate of insulin and decreased that of EGF receptor dephosphorylation, respectively. Immunoblotting with specific antibodies failed to identify PTPase 1B or T-cell PTPase in ENs, whereas positive signals were seen in plasma membrane. These studies indicate that the phosphorylation state of receptor tyrosine kinases is dynamically regulated, with dephosphorylation, by closely associated PTPase(s), playing an important role.