The fate of 125I-labeled heparin binding growth factor I (125I-HBGF-I) after binding to its cell surface receptor has been studied using murine lung capillary endothelial cells (LEII). Binding of 125I-HBGF-I to its receptor at 4 degrees C shows pH dependence with optimal binding at pH 6.5-7.5. The majority (approximately 80%) of 125I-HBGF-I bound to cells at 4 degrees C can be removed by washing with low pH medium, but rapidly becomes acid resistant upon shifting cells to 37 degrees C, with 50% of the 125I-HBGF-I becoming acid resistant after 20 minutes. Electrophoretic analysis of internalized 125I-HBGF-I shows that degradation begins approximately 2 hours after internalization with the appearance of two major labeled fragments of Mr 15,000 and Mr 10,000. Degradation of internalized 125I-HBGF-I is inhibited by the lysosomotropic agent chloroquine. These data suggest that cell-associated 125I-HBGF-I is rapidly internalized and directed to a lysosomal cellular compartment where it is slowly degraded.