The receptor (Fms) for macrophage colony-stimulating factor (M-CSF) is a member of the tyrosine kinase class of growth factor receptors. It maintains survival, stimulates growth, and drives differentiation of the macrophage lineage of hematopoietic cells. Fms accumulates on the cell surface and becomes activated for signal transduction after M-CSF binding and is then internalized via endocytosis for eventual degradation in lysosomes. We have investigated the mechanism of endocytosis as part of the overall signaling process of this receptor and have identified an amino acid segment near the cytoplasmic juxtamembrane region surrounding tyrosine 569 that is important for internalization. Mutation of tyrosine 569 to alanine (Y569A) eliminates ligand-induced rapid endocytosis of receptor molecules. The mutant Fms Y569A also lacks tyrosine kinase activity; however, tyrosine kinase activity is not essential for endocytosis because the kinase inactive receptor Fms K614A does undergo ligand-induced endocytosis, albeit at a reduced rate. Mutation of tyrosine 569 to phenylalanine had no effect on the M-CSF-induced endocytosis of Fms, and a four-amino-acid sequence containing Y-569 could support endocytosis when transferred into the cytoplasmic juxtamembrane region of a glycophorin A construct. These results indicate that tyrosine 569 within the juxtamembrane region of Fms is part of a signal recognition sequence for endocytosis that does not require tyrosine phosphorylation at this site and that this domain also influences the kinase activity of the receptor. These results are consistent with a ligand-dependent step in recognition of the potential cryptic internalization signal.