Epidermal growth factor receptor (EGFR) regulates multiple signaling cascades essential for cell proliferation, growth and differentiation. Using a genetic approach, we found that Drosophila FERM and PDZ domain-containing protein tyrosine phosphatase, dPtpmeg, negatively regulates border cell migration and inhibits the EGFR/Ras/mitogen-activated protein kinase signaling pathway during wing morphogenesis. We further identified EGFR pathway substrate 15 (Eps15) as a target of dPtpmeg and its human homolog PTPN3. Eps15 is a scaffolding adaptor protein known to be involved in EGFR endocytosis and trafficking. Interestingly, PTPN3-mediated tyrosine dephosphorylation of Eps15 promotes EGFR for lipid raft-mediated endocytosis and lysosomal degradation. PTPN3 and the Eps15 tyrosine phosphorylation-deficient mutant suppress non-small-cell lung cancer cell growth and migration in vitro and reduce lung tumor xenograft growth in vivo. Moreover, depletion of PTPN3 impairs the degradation of EGFR and enhances proliferation and tumorigenicity of lung cancer cells. Taken together, these results indicate that PTPN3 may act as a tumor suppressor in lung cancer through its modulation of EGFR signaling.