Tumours exploit their hypoxic microenvironment to induce a more aggressive phenotype, while curtailing the growth-inhibitory effects of hypoxia through mechanisms that are poorly understood. The prolyl hydroxylase PHD3 is regulated by hypoxia and plays an important role in tumour progression. Here we identify PHD3 as a central regulator of epidermal growth factor receptor (EGFR) activity through the control of EGFR internalization to restrain tumour growth. PHD3 controls EGFR activity by acting as a scaffolding protein that associates with the endocytic adaptor Eps15 and promotes the internalization of EGFR. In consequence, loss of PHD3 in tumour cells suppresses EGFR internalization and hyperactivates EGFR signalling to enhance cell proliferation and survival. Our findings reveal that PHD3 inactivation provides a novel route of EGFR activation to sustain proliferative signalling in the hypoxic microenvironment.