Establishment and maintenance of apico-basolateral trafficking pathways are critical to epithelial homeostasis. Loss of polarity and trafficking fidelity are thought to occur as a consequence of transformation; however, here we report that selective mistrafficking of the epidermal growth factor receptor (EGFR) ligand epiregulin (EREG) from the basolateral to the apical cell surface drives transformation. Normally, EREG is preferentially delivered to the basolateral surface of polarized Madin-Darby canine kidney cells. EREG basolateral trafficking is regulated by a conserved tyrosine-based basolateral sorting motif in its cytoplasmic domain (YXXΦ: Y(156)ERV). Both Y156 and V159 are required for basolateral sorting of EREG, because Y156A and V159G substitutions redirect EREG to the apical cell surface. We also show that basolateral sorting of EREG is adaptor protein 1B-independent. Apical mistrafficking of EREG has a distinctive phenotype. In contrast to transient EGFR tyrosine phosphorylation after basolateral EREG stimulation, apical EREG leads to prolonged EGFR tyrosine phosphorylation, which may be related, at least in part, to a lack of negative regulatory Y1045 phosphorylation and subsequent ubiquitylation. Notably, Madin-Darby canine kidney cells stably expressing apically mistrafficked EREG form significantly larger, hyperproliferative, poorly differentiated, and locally invasive tumors in nude mice compared with WT EREG-expressing cells.