Here we show that EGF and EGF receptor (EGFR) are trafficked through a subpopulation of multivesicular endosomes/bodies (MVBs) that are distinct from morphologically identical vacuoles that label for the late endosomal marker lyso‐bisphosphatidic acid (LBPA). EGF stimulation increases both MVB biogenesis and inward vesiculation within EGFR‐containing MVBs. Deletion of annexin 1, a substrate of EGFR tyrosine kinase, abolishes the effect of EGF stimulation on inward vesiculation. This phenotype is reversible by transfection with wild‐type but not Y21F phosphorylation mutant annexin 1. Deletion of annexin 1 has no effect on EGF‐stimulated MVB biogenesis, suggesting that MVB biogenesis and inward vesiculation within MVB are mediated by separate mechanisms. Loss or depletion of annexin 1 has no effect on EGF degradation and causes only a small delay in EGFR degradation, indicating that annexin 1 operates downstream of Hrs‐ and ESCRT‐mediated sorting and is required solely for EGF‐stimulated inward vesiculation. Annexin 1 accumulates on internal vesicles of MVB after EGF‐stimulated inward vesiculation, suggesting that it may be required for a late stage in inward vesiculation.