GTPase regulator associated with focal adhesion kinase 1 (GRAF1) is an essential component of the GPI-enriched endocytic compartment (GEEC) endocytosis pathway. Mutations in the human GRAF1 gene are associated with acute myeloid leukemia, but its normal role in myeloid cell development remains unclear. We show that Graf, the Drosophila ortholog of GRAF1, is expressed and specifically localizes to GEEC endocytic membranes in macrophage-like plasmatocytes. We also find that loss of Graf impairs GEEC endocytosis, enhances EGFR signaling and induces a plasmatocyte overproliferation phenotype that requires the EGFR signaling cascade. Mechanistically, Graf-dependent GEEC endocytosis serves as a major route for EGFR internalization at high, but not low, doses of the predominant Drosophila EGFR ligand Spitz (Spi), and is indispensable for efficient EGFR degradation and signal attenuation. Finally, Graf interacts directly with EGFR in a receptor ubiquitylation-dependent manner, suggesting a mechanism by which Graf promotes GEEC endocytosis of EGFR at high Spi. Based on our findings, we propose a model in which Graf functions to downregulate EGFR signaling by facilitating Spi-induced receptor internalization through GEEC endocytosis, thereby restraining plasmatocyte proliferation.