Two structurally related but different polypeptide growth factors, epidermal growth factor (EGF) and transforming growth factor-alpha (TGF-alpha), exert their activities after interaction with a common cell-surface EGF/TGF-alpha-receptor. Comparative studies of the effects of both ligands have established that TGF-alpha is more potent than EGF in a variety of biological systems. This observation is not explained by differences in affinities of the ligands for the receptor, because the affinity-constants of both factors are very similar. We have compared the intracellular processing of ligand-receptor complexes using either EGF or TGF-alpha in two different cell systems. We found that TGF-alpha dissociates from the EGF/TGF-alpha-receptor at much higher pH than EGF, which may reflect the substantial difference in the calculated isoelectric points. After internalization, the intracellular TGF-alpha is more rapidly cleared than EGF, and a substantial portion of the released TGF-alpha represents undegraded TGF-alpha in contrast to the mostly degraded EGF. In addition, TGF-alpha did not induce a complete down-regulation of cell surface receptors, as observed with EGF, which is at least in part responsible for a much sooner recovery of the ligand-binding ability after down-regulation, in the case of TGF-alpha. These differences in processing of the ligand-receptor complexes may explain why TGF-alpha exerts quantitatively higher activities than EGF.